Managing and Using Information Systems PDF

Managing and Using Information Systems Eighth Edition Keri E. Pearlson, Carol S. Saunders and Dennis F. Galletta Chapter 5 Information Systems and Digital Transformation Walmart Canada Opening Case (1 of 2) Walmart Canada faced high cos...

Managing and Using Information Systems Eighth Edition Keri E. Pearlson, Carol S. Saunders and Dennis F. Galletta Chapter 5 Information Systems and Digital Transformation Walmart Canada Opening Case (1 of 2) Walmart Canada faced high costs in the act of paying invoices at an immense scale, involving 500,000 truckloads of products per year to sell in their stores o 70 third-party freight carriers Any of 200 variables sometimes created billing changes and delays Up to 70% of invoices were under dispute at one time or another Some very vocal carriers complained about how long it took for them to be paid They quickly realized the system needed to be completely redesigned and built from scratch 5-2 Walmart Canada Opening Case (2 of 2) Walmart Canada engaged DLT Labs to develop a solution, who promised a solution within three months By March of 2021, the system was rolled out to all their third-party carriers The impact of the changes was significant o The 11 steps were collapsed to five steps to process invoices o The invoices were most often finalized within 24 hours of delivery o The number of disputes fell from 70% to under 2% o Could also take advantage of early-payment discounts Benefited haulers as well 5-3 Introduction IS can enable or impede business change To manage effectively means to manage change effectively The term process is used extensively in this chapter o In some instances, it is used to refer to the steps taken to change aspects of the business o At other times, it is used to refer to the part of the business to be changed: the business process 5-4 Functional Perspective Versus Business Process Perspective When effectively linked with improvements to business processes, advances in IS enable changes that make it possible to do business in a new way Transformation requires discontinuous thinking—recognizing and shedding outdated rules and fundamental assumptions that underlie operations 5-5 A Simple Functional Structure 5-6 Functional Perspective In a functional organization, departments are organized on the basis of their core competencies These areas become self-contained functional units, which can be useful 1. They allow an organization to optimize and improve expertise and training over time 2. The functions allow the organization to avoid redundancy in expertise by hiring one person who can be assigned to projects all over the organization Functional organizations can experience significant suboptimization 1. Individual departments often recreate information maintained by other departments 2. Communication gaps between departments are often wide 3. Functions tend to lose sight of the objective of the overall organization and try to maximize their local goals 5-7 Business Process Perspective (1 of 2) A business process perspective keeps the big picture in view and allows the manager to concentrate on the work that must be done to ensure the optimal creation of value o A.k.a process perspective A process is defined as an interrelated, sequential set of activities and tasks that turns inputs into outputs and metrics, to measure effectiveness o Throughput: how many outputs can be produced per unit of time o Cycle time: how long it takes for an entire process to execute 5-8 Sample Procurement Business Process 5-9 Cross-Functional Nature of Business Processes 5-10 Business Process Perspective (2 of 2) Focusing on business processes ensures focusing on the business’s goals because each process has an “endpoint” A business process perspective requires an understanding that processes exist to serve the larger goals of the business When managers take a business process perspective, they are able to optimize the value that customers and stakeholders receive by managing the flow as well as the tasks 5-11 Comparison of Functional Perspective and Business Process Perspective Functional Perspective Business Process Perspective Definition Self-contained functional units such as Interrelated, sequential set of activities marketing, operations, finance, and so on and tasks that turns inputs into outputs Focus Function Cross-function Goal Accomplishment Goals optimized for the function, which may Goals optimized for the organization, or be suboptimal for the organization the “big picture” Benefits Core competencies highlighted and Avoidance of work duplication and developed; functional efficiencies cross-functional communication gaps; organizational effectiveness Problems Redundancy of information throughout the Difficulty in finding staff who can be organization; cross-functional inefficiencies; knowledgeable generalists; need for communication difficulties sophisticated software 5-12 Zara’s Cross-Functional Business Processes Zara’s parent company, Inditex, has grown Zara and its sister companies to over 5,800 stores in 200 markets working with more than 1,700 suppliers and 8,200 factories around the world Zara often is able to design, produce, and deliver a garment to the stores within two weeks and stores get new styles twice a week Zara’s designers are co-located with the production team, including marketing, procurement, and production planners Its 12 logistics centers serve the needs of the stores, making deliveries possible anywhere in the world in no more than two days Zara’s information technology provides a platform but does not preclude informal face-to-face conversations 5-13 Building Agile and Dynamic Business Processes Agile business processes are designed to simplify redesign and reconfiguration Dynamic business processes reconfigure themselves as they “learn” and the business utilizes them o Often found in manufacturing operations, where production lines are reconfigured regularly to accommodate new products and technologies o “Agile” software development methodologies are often used to rapidly and collaboratively create working and relevant software Many processes have been designed as apps An example of a dynamic process is a network with a changing flow of data Dynamic IT applications, a component of software defined architecture, are required for dynamic business processes 5-14 Changing Business Processes Two well-known techniques for redesigning business processes are: 1. Radical process redesign, which is sometimes called business process reengineering (BPR), or simply reengineering 2. Incremental, continuous process improvement, which includes total quality management (TQM) and Six Sigma The basis of both approaches is viewing the business as a set of business processes rather than using a functional perspective 5-15 Incremental Change Small, incremental change generally involves the following activities: o Choosing a business process to improve o Choosing a metric for measuring the business process o Enabling personnel to find ways to improve the business process based on the metric Total quality management (TQM) is one such approach that incorporates methods of continuous process improvement Six Sigma is an incremental and data-driven quality management approach for eliminating defects from a process o Green Belts o Black Belts 5-16 Radical Change Incremental change approaches work well for tweaking existing processes Major changes usually associated with cross-functional processes require a different type of management tool The goal of radical change is to make a rapid, breakthrough impact on key metrics 5-17 Key Aspects of Radical Change Approaches Need for major change in a short amount of time Thinking from a cross-functional process perspective Challenge to old assumptions Networked (cross-functional) organization Empowerment of individuals in the process Measurement of success via metrics tied directly to business goals and the effectiveness of new processes 5-18 Gaining Acceptance for IT-Induced Change to Work Change is major concern for employees They may resist the changes if they view the changes as negatively affecting them Employees may resist in several ways: o They may deny that the system is up and running o They may sabotage the system by distorting or otherwise altering inputs o They may try to convince themselves, and others, that the new system really will not change the status quo o They may refuse to use the new system when its usage is voluntary 5-19 Stages and Steps in Change Management Lewin's Stage Unfreezing Changing Refreezing Definition Creating motivation to change Providing stakeholders with new Reinforcing change by integrating information, systems, products, or stakeholders’ changed behaviors services and attitudes into new operations resulting from change Kotter’s Steps 1. Establish a sense of urgency: Create 5. Empower broad-based action: 8. Anchor new approaches in a compelling reason why change is Encourage risk-taking and the culture: Reinforce change needed. creative problem solving to by highlighting areas in which 2. Create the guiding coalition: Select a overcome barriers to change. new behaviors and processes team with enough expertise and 6. Generate short-term wins: are linked to success. power to lead the change. Celebrate short-term 3. Develop a vision and strategy: Use improvements and reward the vision and strategic plan to guide contributions to change effort. the change process. 7. Consolidate gains and produce 4. Communicate the change vision: more change: Use credibility Devise and implement a from short-term wins to promote communication strategy to more change so that change consistently convey the vision. cascades throughout the organization. 5-20 Simplified Technology Acceptance Model (TAM3) 5-21 Technology Acceptance Model and Its Variants To avoid the negative consequences of resistance to change, those implementing change must actively manage the change process and gain acceptance for new IS Managers cannot get employees to use a system until they want to use it To convince employees to want to use the system, managers may need to employ unfreezing tactics to change employee attitudes about the system 5-22 Digital Transformation Omnichannel companies allow diverse methods to serve customers Ecosystem drivers use digital technologies to collect and use customer data from all interactions with customers Suppliers sell through others by being the low-cost producer in the value chain Modular producers also offer products and services primarily to others who manage the ultimate customers 5-23 Workflow and Mapping Processes Workflow is the series of connected tasks and activities performed by people and computers that together form a business process It has also come to mean software products that document and automate processes The tool used to understand a business process is a workflow diagram o It shows a picture, or map, of the sequence and detail of each process step 5-24 Blueprint 1. Build an operational IT backbone 2. Build a digital platform on top of the backbone, with the proper components to make it work 3. An external developer platform needs to be assembled 4. Collect insights from customers and suppliers that teams can use to find problems and seek solutions 5. An accountability framework allows coordination of all the new features and components 5-25 Business Process Management (BPM) Some claim that to have truly dynamic or agile business processes requires a well-defined and optimized set of IT processes, tools, and skills called BP M suites Business process management (BPM) systems provide a way to build, execute, and monitor automated processes that are intelligent, dynamic, and may go across organizational boundaries 5-26 Sample Capabilities of BPM BPM Capability Description Business Process Automation Capabilities to automate the interaction of the people, machines and other components of the process to create repeatable and predictable task execution Human Task Management and Capabilities for process stakeholders to initiate tasks and processes as needed and to collaborate Collaboration with each other Monitoring and Business Alignment Capabilities to plan, model, coordinate, govern, and monitor the life cycle of business processes in real time Business Rules and Decision Capabilities to manage rule engines, recommendation engines, and decision management Management engines to insure operational decisions follow company policies Analytics Capabilities to use process and business data for insights, predictions, and prescriptions to aid in decisions and trigger automatic responses in applications Interoperability Capabilities to connect to external applications that might provide additional features and services (for example, Robotic Processing Automation (RPA) tools) Process Discovery and Optimization Capabilities that speed up the time necessary to discover and optimize behaviors needed to improve business processes (for example, analyzing historic information or simulating proposed behaviors of process users) Context and Behavioral History Capabilities to manage data about the context and behavior of past versions of the process 5-27 Types of Enterprise Systems A class of IT applications called an enterprise system is a set of IS tools that many organizations use to enable this information flow within and between processes across the organization Comprehensive software packages that incorporate all modules needed to run the operations of a business are called enterprise information systems (EIS) or simply enterprise systems 5-28 Enterprise Systems and Examples of Processes They support Enterprise System Sample Processes Enterprise resource planning (ERP) Financial management (accounting, financial close, invoice to pay process, receivable management); human capital management (talent management, payrolls, succession planning); operations management (procurement, logistics, requisition invoice payment, parts inventory) Customer relationship management (CRM) Marketing (brand management, campaign management); lead management; loyalty program management; sales planning and forecasting; territory and account management; customer service and support (claims, returns, warranties) Supply chain management (SCM) Supply chain design; order fulfillment; warehouse management; demand planning, forecasting; sales and operations planning; service parts planning; source-to-pay/procurement process; supplier life cycle management; supply contract management Product life cycle management (PLM) Innovation management (strategy and planning, idea capture and management, program/project management); product development and management; product compliance management 5-29 Enterprise Resource Planning (ERP) Enterprise resource planning (ERP) was designed to help large companies manage the fragmentation of information ERP II also makes company information immediately available to external stakeholders ERP III systems include all ERP II functionality plus social and collaboration features 5-30 Characteristics of ERP Systems Integration: ERP systems are designed to seamlessly integrate information flows throughout the company Packages: ERP systems are usually commercial packages purchased from software vendors Best practices: ERP systems reflect an industry’s best (or at least “very good”) practices for generic business processes Some assembly required: The ERP system is software that needs to be integrated with the organization’s hardware, operating systems, databases, and network Evolving: ERP systems were designed first for mainframe systems, then for client– server architectures, and now for web-enabled or cloud-based delivery 5-31 Managing Customer Relationships Customer relationship management (CRM) is a set of software programs that supports management activities performed to obtain, enhance relationships with, and retain customers o Today, CRM has come to mean the enterprise systems that support these processes CRM processes create ways to learn more about customers’ needs and behaviors with the objective of developing stronger relationships The leading CRM software vendor is Salesforce.com CRMs capture and store information about customer preferences so as to better meet customer needs and enhance the customer experience 5-32 Managing Supply Chains A supply chain management (SCM) system manages the integrated supply chain The supply chain of business typically includes the procurement of materials or components, the activities to turn these materials into larger subsystems or final products, and the distribution of these final products to warehouses or customers Supply chain integration is linking supply chains of vendors and customers to streamline the process and to increase efficiency and accuracy o Bullwhip effect 5-33 Challenges of Integrated Supply Chains Partners must agree on the type of information to share, the format of that information, the technological standards they both use to share it, and the security they use Supply chains become so tightly integrated and distributed worldwide that firms often find themselves dependent on a small number of partners Integrated supply chains are truly global in nature 5-34 Advantages and Disadvantages of Enterprise Systems Advantages Disadvantages Represent “best practices” Require enormous amount of work Allow modules throughout the Require redesign of business organization to communicate with practices for maximum benefit each other Require organizational changes Enable centralized decision making Have high risk of failure Eliminate redundant data entry Have very high cost Enable standardized procedures in Are sold as a suite, not individual different locations modules 5-35 When the System Drives the Transformation There are times when it is appropriate to let the enterprise system drive business process redesign 1. When an organization is just starting out and processes do not yet exist 2. When an organization does not rely on its operational business processes as a source of competitive advantage 3. When the current systems are in crisis and there is not enough time, resources, or knowledge in the firm to fix them It is sometimes inappropriate to let an enterprise system drive business process change 1. When an organization derives a strategic advantage through its operational business processes 2. When the features of available packages and the needs of the business do not fit 3. When there is lack of top management support, company growth, a desire for strategic flexibility, or decentralized decision making that render the enterprise system inappropriate 5-36 Challenges for Integrating Enterprise Systems Between Companies With the widespread use of enterprise systems, the issue of linking supplier and customer systems to the business’s systems brings many challenges Some companies have tried to reduce the complexity of this integration by insisting on standards either at the industry level or at the system level 5-37 Copyright Copyright © 2024 John Wiley & Sons, Inc. John Wiley & Sons, Inc. or the author, all rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. 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