Complimentary Asset Examples Essay

9/30/2009 Managing Information Systems – Ch. 1 Information Systems in Global Business Today Learning Objectives Understanding the effects of information systems (IS) on business and their relationship to globalization • Explain why information systems are essential in business • Define an information system and describe its y management, organization, and technology components • Define complementary assets and their role in ensuring that information systems add organizational value • Describe the different disciplines used to study information systems, and explain how each contributes to our understanding of them • Explain what is meant by a sociotechnical systems perspective NBA Teams: A Slam Dunk With IT Problem: Lack of hard data usable in decision-making processes, costly and competitive market • Solutions: Developed a new system designed to collect and organize data using video clips of games • Synergy Sports Technology tags video of each game with hundreds of descriptive categories and allows coaches and players to stream game footage from the Web • Demonstrates IT’s role in innovation and improving business processes • Also Illustrates how the Web has allowed businesses to use new tools to analyze critical data 1 9/30/2009 Information Systems in Business Today • Information systems are transforming business Increase in wireless technology use, Web sites • Shifts in media and advertising • New federal security and accounting laws • Globalization opportunities • Internet has drastically reduced costs of operating on global scale • Presents both challenges and opportunities IT Capital Investment Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and 2008. Source: Based on data in U. S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2008. Figure 1-1 Digital Firms • In the emerging, fully digital firm: Significant business relationships are digitally enabled and mediated – Core business processes are accomplished through digital networks – Key corporate assets are managed digitally • Digital firms offer greater flexibility in organization and management – Time shifting – Space shifting 2 9/30/2009 Example: Virtual Meetings Questions: • What are the advantages of using videoconferencing technologies? What are the disadvantages? • Wh t is t l What i telepresence and what sorts of companies are d h t t f i best suited to use it as a communications tool? • What kinds of companies could benefit from using videoconferencing?

Are there any companies that might not derive any benefits from this technology? IT and Corporate Strategy • Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals • Business firms invest heavily in information systems to achieve six strategic b i hi i i business objectives: bj i – – – – – – Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival IT and Strategic Business Objectives • Operational excellence: Improvement of efficiency to attain higher profitability – Information systems, technology an important tool in achieving greater efficiency and productivity –E Example: W l M ’ R ilLi k system li k suppliers to l Wal-Mart’s RetailLink links li stores for superior replenishment system • New products, services, and business models: – Business model: describes how company produces, delivers, and sells product or service to create wealth – Information systems and technology a major enabling tool for new products, services, business models • Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-based DVD rentals 9/30/2009 IT and Strategic Business Objectives • Customer and supplier intimacy: – Serving customers well leads to customers returning, which raises revenues and profits • Example: High-end hotels that use computers to track customer preferences and use to monitor and customize f d i d i environment – Intimacy with suppliers allows them to provide vital inputs, which lowers costs • Example: J. C. Penney’s information system which links sales records to contract manufacturer IT and Strategic Business Objectives Improved decision making – Without accurate information: • Managers must use forecasts, best guesses, luck • Leads to: –Overproduction, underproduction of goods and services O d i d d i f d d i –Misallocation of resources –Poor response times • Poor outcomes raise costs, lose customers – Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. IT and Strategic Business Objectives • Competitive advantage Delivering better performance – Charging less for superior products – Responding to customers and suppliers in real time –E Example: T l Toyota and TPS (Toyota Production S d (T P d i System) enjoy ) j a considerable advantage over competitors • Survival – Information technologies as competitive necessity – May be: • Industry-level changes, e. g. Citibank’s introduction of ATMs • Governmental regulations requiring record-keeping – Examples: Toxic Substances Control Act, Sarbanes-Oxley Act 9/30/2009 The Interdependence Between Organizations and IT In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do. Figure 1-2 What is an Information System? Information systems: – Set of interrelated components – Collect, process, store, and distribute information – Support decision making, coordination, and control • Information vs. data – Data are streams of raw facts – Information is data shaped into meaningful form Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Figure 1-3 Information System Activities • The IS “feedback loop”: Input: Captures raw data from organization or external environment – Processing: Converts raw data g into meaningful form – Output: Transfers processed information to people or activities that use it – Feedback: Output returned to organization members to help evaluate or correct inputs Figure 1-4 An information system contains information about an organization and its surrounding environment. Three basic activities—input, processing, and output—produce the information organizations need. Feedback is output returned to appropriate people or activities in the organization to evaluate and refine the input.

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Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory agencies, interact with the organization and its information systems. 5 9/30/2009 Information Systems in Organizations • Organizational dimension of information systems – Hierarchy of authority, responsibility • Senior management • Middle management g • Operational management • Knowledge workers • Data workers • Production/service workers Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management.

Information systems serve each of these levels. Scientists and knowledge workers often work with middle management. Figure 1-6 Perspectives on Information Systems • Organizational dimension of information systems (cont. ) – Separation of business functions • Sales and marketing • Human resources • Finance and accounting • Manufacturing and production – Unique business processes – Unique business culture – Organizational politics Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems.

An information system creates value for the firm as an organizational and management solution to challenges posed by the environment. Figure 1-5 Information Systems Dimensions • Management dimension – Managers set organizational strategy for responding to business challenges – In addition, managers must act creatively: • C ti of new products and services Creation f d t d i • Occasionally re-creating the organization • Technology dimension – Computer hardware and software – Data management technology – Networking and telecommunications technology • Networks, the Internet, intra/extranets, World Wide Web IT infrastructure: provides platform that system is built on 6 9/30/2009 UPS Competes Globally With IT • Questions: • What are the inputs, processing, and outputs of UPS’s package tracking system? • Wh t technologies are used b UPS? H What t h l i d by How are th these technologies related to UPS’s business strategy? • What problems do UPS’s information systems solve? What would happen if these systems were not available? UPS’s Tracking System Dimensions of UPS tracking system – Organizational: • Procedures for tracking packages and managing y provide information inventory and p – Management: • Monitor service levels and costs – Technology: • Handheld computers, bar-code scanners, networks, desktop computers, etc. Adding Value with Information Systems • Business perspective on information systems: – Information system is instrument for creating value – Investments in information technology will result in superior returns: • Productivity increases • Revenue increases • Superior long-term strategic positioning • Business information value chain Raw data acquired and transformed through stages that add value to that information – Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits 7 9/30/2009 The Business Information Value Chain From a business perspective, information systems are part of a series of value-adding activities for acquiring, transforming, and distributing information that managers can use to improve decision making, enhance organizational performance, and, ultimately, increase firm profitability. Figure 1-7 Returns on IT Investment IT investments produce good returns, but with significant variability • Q1: low IT investment, good returns • Q2: high IT, good returns • Q3: low IT, low returns • Q4: high IT, low returns Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms. Figure 1-8 Making IT Investments Produce • Investing in information technology does not guarantee good returns • Factors: – Adopting the right business model – Investing in complementary assets (organizational and management capital) – Actions of competitors, value chain partners Complementary assets: – Assets required to derive value from a primary investment – Firms supporting technology investments with investment in complementary assets receive superior returns – Example: invest in technology and the people to make it work properly 8 9/30/2009 Complimentary Asset Examples • Complementary assets: – Organizational investments • Appropriate business model • Efficient business processes – Managerial investments • Incentives for management innovation • Teamwork and collaborative work environments – Social investments • The Internet and telecommunications infrastructure • Technology standards Approaches to Studying IT

The study of information systems deals with issues and insights contributed from technical and behavioral disciplines. Figure 1-9 Technical and Behavioral Aproaches • Technical approaches: – Emphasize mathematically based models – Computer science, management science, operations research • Behavioral approaches: – Consider behavioral issues (strategic business integration, implementation, etc. ) as primary drivers – Psychology, economics, sociology 9 9/30/2009 Management Information Systems • Management Information Systems – Combines computer science, management science, operations research and practical orientation with behavioral issues Four main actors – Suppliers of hardware and software – Business firms – Managers and employees – Firm’s environment (legal, social, cultural context) The Sociotechnical View • Approach of our book: the “Sociotechnical” view • Optimal organizational performance is achieved by jointly optimizing social, technical systems used in production • Helps avoid purely technological approach In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization mutually adjust to one another until a satisfactory fit is obtained. Figure 1-10 10

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