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Management Information Systems
Strategic Use of Information Systems
Prof. Rushen Chahal
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Information Systems for Competitive
Positioning Objectives
A Strategic Perspective on Information
Systems A. Why a New Perspective?
B. Change
Information Systems in Strategic Thrusts B. Creating Products & Services based on IS
C. Transforming Products/Processes with IS
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Information Systems for Competitive
Positioning Strategies, Forces, and Tactics in Competitive
Markets
A. Competitive Systems
B. Competitive Forces
C. An example of Strategic Thrusts
D. Tactical Moves in Pursuing a Strategy
E. Strategic Cube
Z Figure 5.3 p 156
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Information Systems for Competitive
Positioning
Value Chain Analysis of Strategic Opportunities
Customer-Oriented Strategic Systems
A. A Scenario:
B. Outbound Logistics
C. Marketing & Sales
D. Service
Strategic Systems in Operations
A. Manufacturing
B. Service Industries
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Information Systems for
Competitive Positioning Supplier-Oriented Strategic Systems: Inbound
Logistics
Organizational Requirements for SuccessfulStrategic Information Systems
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Information Systems for
Competitive Positioning To Reengineer Business processes
A. Definition:
B. The reason for the shifts
C. Where are we Headed?
D. Using IT as a Catalyst for CHANGE
E. Principles Guiding Business Reengineering
F. Lesson about Reengineering
G. The role of the System Department
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Information Systems for
Competitive Positioning For Interorganizational Linkage
A. Characteristics of interorganizational Systems
(IOS)
B. EDI
Strategic Systems Can change how
organizations work
A. Changing how decisions are made
B. Offering more communications options
C. Providing tools for coordination
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Objectives
Improve competitive position of organization
Transform the way the organization does
business Create a new perception of the nature of the
business
Change the firms products & services
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Objectives
Create new relationships with the
environment:
Customers
Suppliers
Competitors
Government
Partners
Employees
Community
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A Strategic Perspective on
Information SystemsFrom the realization that IS may be designed
to give a firm an enhance ability to compete &
possible furnish the firm with a competitive
advantage in the market place"
Zwass, 1992, p145
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A Strategic Perspective on
Information Systems A. Why a New Perspective? The dynamics of information; Many organization both
produce goods & services
process information
Reduced cost of IT; The substitution power of IS: IS in
place of resources (labor, materials)
An interaction effect: Educated people, technology &
change in organization culture The change started to occur in the 1980's with the birth of
the USER- TRON
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A Strategic Perspective on
Information Systems B. Change
A strategic system radically alters the way an
organization does business
Most companies change via a series of small steps
Strategic benefits from a system: Lower cost;
Market penetration = competitive advantage
The company may not attribute COMPETITIVEADVANTAGE to IS, but one uses these to justify
the IS
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Information Systems
in Strategic Thrusts Competitive systems
Cooperative systems
Systems that change What are Strategic Systems?
Strategy: a definition - The science or art of military
command as applied to the overall planning conduct of
large-scale combat operations. A plan of action resultingfrom the practice of this science. The art or skill of using
stratagem in politics, business, courtship or the like.
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Information Systems
in Strategic Thrusts Stratagem: A military maneuver designed to
deceive or surprise an enemy.
Strategic: Essential to the effective conduct of
war. Designed to destroy the military potential ofan enemy.
Strategic Information System: An information
system designed to give the owner organization a
strategic competitive advantage.
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Information Systems
in Strategic Thrusts Strategic systems: A systems that supports or
shapes a business unit's competitive strategy.
outward looking: customers, competitors,
environments inward looking: employees, systems, procedures
Characteristics of Strategic systems:
significantly changes business performance as
measured by one or more key indicators. (Take no
prisoners).
contributes to attaining a strategic goal.
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Information Systems
in Strategic Thrusts Strategic systems follow: a prototype form, tested on a small scale by the
customers then iteratively developed piece by piece.
User involvement is crucial both manager andcustomer.
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Information Systems
in Strategic Thrusts A. Redefining Company Business
What business are we in?
Actually a "new vision" is created as an answer
Build on existing strengths
Examples:
B. Creating Products & Services based on IS
C. Transforming Products/Processes with IS
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Redefining Company
BusinessCompany Type New VisionAmericanExpress
FinancialService
InformationBusiness
ReutersHolding FinancialInformation FinancialExecution,
Merrill Lynch StockBroker
Financial Services(CMA, EFTS)
Sears Retailer
(before 1992)
Information
BusinessDun &Bradstreet
Financial Infor mation
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Creating Products &
Services based on ISCompany Type Product/ServiceCiticorp Financial
ServiceSoftware - creditunions international
bankingBacktel Construction Construction
Management software
IBM/Sears Prodigy
H & R Block Tax Compuserve
ProcurementTechnology
BiddingInformation
Matching system forgovernment bids withcompany profiles
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Transforming Products / Processes
with ISCompany Type TransformationFederalExpress
Shipping Infor mation:Cosmos
UPS Shipping Infor mationBaxter Phar maceutical Automated Order
taking system
AmericanAirlines
Saber System:ReservationSystem
UnitedAirlines
Apollo System
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Strategies, Forces, and Tactics in
Competitive Markets A. Competitive Systems
The watchwords for the 2000's
Innovation Speed
Service
Quality
To Stay in Business
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Strategies, Forces, and Tactics in
Competitive Markets a. To Gain Market Share (Federal Express)
Continuously improve quality
Improve the value of service
Get closer to the customers
Make an international business profitable
Produce strong cash flow
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Strategies, Forces, and Tactics in
Competitive Markets b. Uncovering Strategic Use of Systems
Analyze competitive forces
Study strategic thrusts
Study the value chain
Take the customer's view
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Strategies, Forces, and Tactics in
Competitive Markets c. Strategies: Z-1998 Figure 3.11 p96
Differentiation
Develop products & services which are different
from what the competition offers
superior attributes
distinguishing features
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Competitive StrategiesCompetitive Strategies
Competitive AdvantageCompetitive Advantage
CompetitiveCompetitive
ScopeScope
Lower Cost Differentiation
Broad
Target
NarrowTarget
Cost
Leadership
Cost
Focus
Differentiation
Focused
Differentiation
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Strategies, Forces, and Tactics in
Competitive Markets Cost leadership based on efficient operations
based on effective operations
economies of scale become a low cost producer
market segmentation (niche)
Focused differentiation
Market niche
Cost focus
narrow market & low cost
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Strategies, Forces, and Tactics in
Competitive Markets
B. Competitive Forces
Threat of new entrants
Intensifying realty
Pressures from substitute products
Bargaining power of customers
Bargaining power of suppliers
Z-1998 Figure 3.12 p97
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Strategies, Forces, and Tactics in
Competitive Markets C.Process for uncovering strategic systems
opportunities
1. informal meetings to sell the idea
2. a tutorial on the theory of strategic information
3. Discussion of case examples
4. BRAINSTORMING
5. Executive brainstorming
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Strategies, Forces, and Tactics in
Competitive Markets
D. Tactical Moves in Pursuing a Strategy
Internal innovation
Internal growth (reengineering)
economies of scale (large volume)
economies of scope (Small volume)
Mergers
Strategic alliances
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The Strategic CubeThe Strategic Cube
CustomerPower
SupplierPower
PresentCompetitors
PotentialCompetitors
SubstituteProducts
COMPETITIVECOMPETITIVE
FORCES TOFORCES TO
CONTEND WITHCONTEND WITH
STRATEGIESSTRATEGIES
TACTICSTACTICS
StrategicAlliance
Merger orAcquisition
Internal Growth
InternalInnovation
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Value Chain Analysis
of Strategic Opportunities
Definition: Value chain- consists of the major
activities that have been added to the product
during its creation, development or sale.
Primary activities : the creation of product or
service
inbound logistics - order entry data collection,
obtain raw materials, subassemblies
Operations - order processing, MRP;
transformation of inputs to finished goods
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Value Chain Analysis
of Strategic Opportunities
Primary activities : the creation of product or
service
Outbound logistics - distribution & sales data;
storing products,
Marketing sales - promotions, discounting;
establishing a customer need
Service activities - calls, returns, product rotationand maintenance
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Value Chain with Typical Strategic ISValue Chain with Typical Strategic IS
Mapped onto itMapped onto it
EDI-Based
Purchasing
System
Computer-
Integrated
Mftg.
Automated
Ordering
System
Expert
Systems for
Salespeople
Telemaintenance
Expert
Systems
Inbound
LogisticsOperations
Outbound
Logistics
Marketing
and SalesService
Downstream Chains
of Customers
Upstream Chains
of Suppliers
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Value Chain Analysis
of Strategic Opportunities
Z-1992 fig 5.5 & 5.6
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Customer-Oriented Strategic
Systems
"How can we use IT to help our customers
more easily acquire our products and get
more value out of it?"
The Customer Resource Life Cycle
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The Customer Resource
Life Cycle - 1
PHASES EXAMPLESDETERMINE THE NEEDEstablish requirements
Specify Attributes
Videodisc system to selecta product (fish)
PC to help determineproduct features
PC system
to locateproduct
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The Customer Resource
Life Cycle - 2
PHASES EXAMPLESACQUIRE THE PRODUCTLocate the supplier
Order the productAuthorize and pay for
productAcquire the product
Test and accept the product
On-Line yellow pages,Airline reservation systems
EDI order entry systemsElectronic funds transfer
and billing systemsJIT insuranceA
TMs MA
CsDrug store systems (checkfor other products thecustomer is using)
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The Customer Resource
Life Cycle - 3
PHASES EXAMPLESMANAGE THE
PRODUCTS USE
Maintain inventoryMonitor the productUpdate the productRepair the product
On-Line inventory,shipment tracking systems
Sales vs return to establishbetter stocking policies
Auto
matic productupgrades
Maintenance reminders
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The Customer Resource
Life Cycle - 4
PHASES EXAMPLESDISPOSE OF THEPRODUCT
Dispose or transferAccount for product
On-Line terminals for carrentals
Record keeping forcustomers
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Customer-Oriented Strategic
Systems
Whence Success?
Opportunity costs: Switching costs of customer are low
(from other supplier to you)
YOU provide hardware/software, training, custom
implementation
You ensure the exit cost is high
Staying power based on time & money exit costs
Offer responsive service
provide maintenance
provide upgrades 48Prof. Rushen Chahal
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Customer-Oriented Strategic
Systems
ISO
YOU know the customers business
STRATEGIC BENEFITS
1. Barriers to entry for new competitors are high
ordering systems take time to develop
costs are high (but are coming down)
2. Prevent substitution of other products
3. Market Segment leader: You have a DB of all yourcustomers
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Customer-Oriented Strategic
Systems
4. You have reorganized your company based customer
service and technology
provided value to your customers
Systems based JUST on technology DO NOT always create
Competitive ADVANTAGE
(I.E. ATM's by Citicorp)
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B. Outbound Logistics
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Service / System Examples
Ordering Process Ordering systems
FacilitationPayments
Creditcard processingto other firmsDebit Cards (Nice, etc)
Facilitation ofInformation
ATMs for/as ATMsdistribution of tickets
student gradesInformation on usage
TrackingInformation
Fed Express/ UPS
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Customer-Oriented Strategic
Systems
C. Marketing & Sales
The Key is to use IS added to the creativity of the
people
Systems used in Marketing & Sales
Ordering
Customer DB's information by & about contact
Telemarketing Quality
Tracking
Scheduling
etc... 52Prof. Rushen Chahal
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C. Market & Sales
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System Company
Insulation requirementfor homes
Owens CoringFiberglass
Properietary Clinicaldata to Physicians
Genentech:Notebook PCs
Brokerage Services:
Match Customers
needs with suppliers
Airline Guide
(Display flights)Select & Configure CAD / CAM - FMS
Marketing Analysis Citicorp: Fromcredit card data
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Customer-Oriented Strategic
Systems
D. Service
After Sales continuation of customer relationship
Reduce Cognitive dissonance
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D. Services
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System Company
Maintenance Contract:send reminders
Sears
Mazda Follow-up
Double warranty onpurchases
AmericanExpress
Tele-maintenance
system
: Update onsystems configurations
Stratus
Com
puter Corp.
Diagnostics Westinghouse
Update of software Prodigy
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Strategic Systems
in Operations
A. Manufacturing
CIM
MRP II
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5.6 Strategic Systems
in Operations Z Figure 5.7 p166
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Strategic Systems in
Operations: Manufacturing
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System Benefit
CIM Control of entire process
FMS Units of 1
CAD / CAM Configuration control foreach customer
MRP II Reduced inventory costsReduced cycle time
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Strategies for CIM and BRP
Fjermestad & Chakrabarti, 1993
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Strategic Systems
in Operations B. Service Industries Anything that facilitates the information flow
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Strategic Systems in
Operations: Service Industries
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System Benefit
System Benefit
1-800-DENTIST Find a dentist
phone numberbase ordering
call back when queueis full
Direct meterreading
Reduced costs andtime
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Supplier-Oriented Strategic
Systems: Inbound Logistics
Z-1992 Figure 5.6 p160
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Supplier-Oriented Strategic
Systems: Inbound Logistics
Using IS to increase its POWER with Suppliers
Want:
Price
Delivery Time (JIT)
Quality
Quantity
Service
Certification
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Supplier-Oriented Strategic
Systems: Inbound Logistics
Want:
Control
Good relationship
Linkage
GM Example:
JIT/ No-inventory
Certified / Quality
CAD/CAM for custom engineering
EDI for all transactions72
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Supplier-Oriented Strategic
Systems: Inbound Logistics
ShopRite Example:
a. UPC codes for collecting unit prices
b. PicePlus Club: Customer data
c. a & b customer data base
Information on:
Who buys what
Who buys when
d. point of sales coupons for the "other product"
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Supplier-Oriented Strategic
Systems: Inbound Logistics e. from a & b:
Crew scheduling
Shelf stocking
f. portable scanners for inventory checking g. All linked with main local warehouse
h. all line via EDI to suppliers
i. get store demand fees for stocking new products
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Organizationa Requirements or
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g q
Successful Strategic Information
Systems Requirements for success Active support of Senior management
Integrated Planning
Direct reporting responsibilities of strategic
Team
Feedback & Control
budget
reward
correction75
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Organizationa Requirements or
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g q
Successful Strategic Information
Systems Feedback & Control Readiness: Culture, Resistance
sustainability
1. lead time will allow the achievement of CA
2. Copy cats may fail because of Uniqueness
3. If copied: Your organization will still have Preempted
the marketplace
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T R i
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To Reengineer
Business processes
The 1980' focus is on the Competitive
advantage
The 1990's focus on internal outmode
business practices
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To Reengineer
Business processes
A. Definition: Fundamentally redesigning
how the enterprise works-
procedures
control mechanisms
reporting relationships
decision makers
compensation criteria
The is to replace the paper-base world with IT
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To Reengineer
Business processes
B. The reason for the shifts
1. From competition
Quality
Cycle time
customer service
niche markets
2. Failures in implementing IT
3. Organizations are being forced to cut expenses
4. The cost/performance of computer
hardware/software has dropped79
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To Reengineer
Business processes
C. Where are we Headed?
Sprague Fig 3.5 p83
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To Reengineer
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To Reengineer
Business processes
E. Principles Guiding Business Reengineering
1. Organize around Outcomes, Not tasks
Right!
2. People who use the output should perform the
process
order your own supplies
3. Include information processing in the real workthat produces the information
decentralization. At Ford the receiving department
receive, process and authorizes payment
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To Reengineer
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To Reengineer
Business processes
F. Lesson about Reengineering
Synchronize:
aligning strategy
people
technology
business processes
to cut cost, reduce non-valued-added- work, and
streamline client organizations
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To Reengineer
Business processes 1. Business integration is a Process, not a project
2. People need time to change
3. Recognize the potential up front, get people
involved early
4. Make job change throughout the organization
5. Manage the pace of change
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To Reengineer
Business processes
G. The role of the System Department
1. Be an influencer
2. Participate on multifunctional teams
3. Build more Flexible Applications faster
4. Introduce processing supporting technologies.
Image processing
EDI, Groupware, video conferencing, E-mail 5. Manage the technical architecture
flexibility
adaptability86Prof. Rushen Chahal
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For Interorganizational Linkage
A. Characteristics of interorganizational
Systems (IOS)
1. IOS require partners
2. Standards
3. Education
4. Coordination via third parties (consultants)
5. The work must be synchronized 6. Work processes are to be reevaluated
7. Technical aspects are the easy ones
8. Effort cannot be secretive
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For Interorganizational Linkage
Cooperative Systems
Definition: Coordination- the act of working together
The definition of cooperative is nested within
coordination. Sprague Fig 3.7 p96 (also 3.4)
B. EDI
The computer to computer exchange of standard business
transactions
payment/remittance
request for quotations
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For Interorganizational Linkage
B. EDI (cont)
purchase order
logistics
Applications that have the greatest Benefits:
they involve a large number of transactions
these transactions require careful and accurate
reporting
they make it easier for the customer to purchase goods
& services
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Strategic Systems Can change how
organizations work
A. Changing how decisions are made
B. Offering more communications options
C. Providing tools for coordination
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Strategic Systems Can change how
organizations work
A. Changing how decisions are made
To match the increasing turbulence and
complexity organizational decision making will be:
more frequent
performed faster
more complex
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Strategic Systems Can change how
organizations work Thus three technologies will be needed:
advanced computer and communications technologies
computer message system
computer conferencing video conferencing
decision group technologies (GDSS) as environmental
complexity increases there will be a need for more
information exchanging either via meetings of CMC.
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Strategic Systems Can change how
organizations work Thus systems (CMC) with different structures to
aid different problems (i.e. EBS, DI, Agenda
setting, etc)
Technology support for managing decision processes project mgt for DM
more rapid techniques
expert systems
AI Structuring techniques
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Strategic Systems Can change how
organizations work
B. Offering more communications options
E-mail, CMC, GDSS, CSCW
These systems can ease and enhance
communication between individuals and groups.
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Strategic Systems Can change how
organizations work 1. Among Individuals
time and distance can be collapsed
small messages will no longer be a potential bother to
other people communication has increase
thus people are better informed
problems are resolved much faster; people get the
point more quickly when messages are typed memo wars decrease
CMC encourages action; messages are informal yet to
the point
95Prof. Rushen Chahal
Strategic Systems Can change how
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Strategic Systems Can change how
organizations work 2. Among groups
time and distance are collapsed
people can easily signal interests to other people
messages can easily be sent to other people E-mail reduces the costs of finding people with mutual
interests
Can build strong ties (within group) weak ties between
groups
96Prof. Rushen Chahal
Strategic Systems Can change how
8/3/2019 MIS- Strategic Use of Information Systems
97/97
Strategic Systems Can change how
organizations work 2. Among groups
E-mail encourages intergroup communication because
it reduces time and effort
filtering mechanism become important to screen in/out
important/junk mail
innovation/ effectiveness can be improved
A second order effect
A first order effect is efficiency