1 Reading notes for chapter 3 in the textbook. Read Section 3.1 leisurely. It is on the organizations and the information systems. You are probably familiar with the organization theory .Pay attention to the technical and behavioral definitions of organizations as well as bureaucracy, structural characteristics of organizations, standard operating procedures and organizational culture. Section 3.2 is on the changing role of information systems in the organization and is interesting to read how information systems leads to automation, decreases transaction costs and lays foundations for virtual organizations. Note the definitions of end users and CIO. Section 3.3 is on decision-making, perhaps another familiar topic for you. Pay attention to strategic decision making, structured and unstructured decisions, rational model of decision making .It would be interesting to read individual models of decision-making and organizational models of decision-making. Reading notes for chapter 3 in the textbook - Continued Section 3.4 is on the strategic use of information technology to gain competitive advantage. Strategic use of information technology may be at the business-level, firm level or industry level. Pay attention to how information technology is used at each level, especially strategies employed at each level. Strategic transition and its management is crucial for successfully steering the organization into new technology. Pay attention to the fact the information technology is widely used in every type of organization to be competitive, to keep pace with competition, to meet the legal requirements, and to improve the production. Hence, strategic use of information technology results in significant competitive advantages. This section deserves careful attention.
Transcript
1
Reading notes for chapter 3 in the textbook.
Read Section 3.1 leisurely. It is on the organizations and the information
systems. You are probably familiar with the organization theory .Pay attention to the technical and behavioral definitions of organizations as
well as bureaucracy, structural characteristics of organizations, standard
operating procedures and organizational culture.
Section 3.2 is on the changing role of information systems in the
organization and is interesting to read how information systems leads to automation, decreases transaction costs and lays foundations for virtual
organizations. Note the definitions of end users and CIO.
Section 3.3 is on decision-making, perhaps another familiar topic for
you. Pay attention to strategic decision making, structured and unstructured decisions, rational model of decision making .It would be
interesting to read individual models of decision-making and
organizational models of decision-making.
Reading notes for chapter 3 in the textbook - Continued
Section 3.4 is on the strategic use of information technology to gain competitive advantage. Strategic use of information technology may be
at the business-level, firm level or industry level. Pay attention to how
information technology is used at each level, especially strategies
employed at each level. Strategic transition and its management is
crucial for successfully steering the organization into new technology.
Pay attention to the fact the information technology is widely
used in every type of organization to be competitive, to keep pace with
competition, to meet the legal requirements, and to improve the
production. Hence, strategic use of information technology results in significant competitive advantages. This section deserves careful
attention.
2
Chapter 3: Information Systems,
Organizations, Management and
Strategy
organizations Information
Technology
Mediating Factors
Environment
Culture
Structure
Standard procedures
Business process
Politics
Management Decisions
Chance
Organizations And Information Technology
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Structure
Hierarchy
division of labor
Rules,procedures
Business processes
Process
Rights/obligations
Privileges/responsibilities
Values
Norms
People
Environmental
resources
Environmental
outputs
FORMAL ORGANIZATION
•Organization (technical definition)
A Stable, formal, social structure that takes resources from
the environment and processes them to produce outputs.
•Organization (behavioral definition)
A collection of rights, privileges, obligations, and
responsibilities that are delicately balanced over a period of
time through conflict and conflict resolution.
•Bureaucracy
Formal Organization with a clear-cut division of labor, abstract
rules and procedures, and impartial decision making that uses
technical qualifications and professionalism as a basis for
Promoting employees.
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STRUCTURAL CHARACTERISTICS OF ALL
ORGANIZATIONS
•Clear division of labor
•Hierarchy
•Explicit rules and procedures
•Impartial judgments
•Technical qualifications for
positions
•Maximum organizational
efficiency
ORGANIZATIONAL STRUCTURES
Organization-
al Type
Description Example
Entrepreneurial structure
Young, small firm in a fast-changing environment. It has a simple structure and is managed by an entrepreneur serving as its single chief executive officer.
Small startbusiness
Machine bureaucracy
Large bureaucracy existing in a slowly changing environment, producing standard products. It is dominated by a centralized management team and centralized decision making.
Midsize manufacturing firm
Divisionalized bureaucracy
Combination of multiple machine bureaucracies, each producing a different product or service, all toped by one central headquarters.
Fortune 500 firms such as general motors
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ORGANIZATIONAL STRUCTURES
Organization-al Type
Description Example
Professional bureaucracy
Knowledge-based organization where goods and services depend on the expertise and knowledge of professionals. Dominated by department heads with weak centralized authority.
Law firms, school systems, hospitals
Adhocracy “Task force” organization that must re to rapidly changing environments. Consists of large groups of specialists organized into short-lived multidisciplinary teams and has weak central management.
Consulting firms such as the Rand corporation.
Summary of salient features of
organizationsCommon Features
• Formal Structure
• Standard operating
procedures(SOPs)
• Politics
• Culture
Unique features• Organizational type
• Environments
• Goals
• Power
• Constituencies
• Function
• Leadership
• Tasks
• Technology
• Business processes
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Information Systems department
The Formal organizational unit that is responsible for the informationsystems function in the organization.
Programmers
Highly trained technical specialists who write computer software
instructions.
Systems analysts
Specialists who translate business problems and requirements into information requirements and systems,acting as liaison between the
information systems department and the rest of the organization.
Information systems managers
Leaders of the various specialists in the information systems department.
Chief information officer(CIO)
Senior manager in charge of the information systems function in the firm.
End users
Representatives of departments outside the information systems group for whom applications are developed.
THE ORGANIZATION
Senior managementMajor end users(divisions)
Information Systems department
IT Infrastructure
Hardware
Software
Data storage
Networks
Information Systems Specialists
CIOManagers
Systems analysts
Systems designers
Programmers
Network specialistsDatabase administrator
Clerical
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Microeconomic model of thee firmModel of the firm that views information technology as a factor of
production that can be freely substituted for capital and labor.
Transaction cost theoryEconomic theory stating that firms grow larger because they can
conduct market place transactions internally more cheaply than
they can with external firms in the marketplace.
Agency theoryEconomic theory that views the firm as a nexus of contracts among
self-interested individuals who must be supervised and managed.
Virtual organizationOrganization using networks to link people,assets and ideas to create
and distribute products and services without being limited to traditional
organizational boundaries or physical location.
How Information Systems Affect the Organizations
TASK
TECHNOLOGY
STRUCTURE
PEOPLE
Organizational Components and Change
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Classical model of management
Traditional description of management that focused on its
formal functions of planning, organizing, coordinating,
deciding and controlling.
Behavioral models
Descriptions of management based on behavioral scientists
observations of what managers actually do in their jobs.
Managers and Decision-Making
Managerial roles
Expectations of the activities that managers should perform in an
organization.
Interpersonal roles
Mintzberg’s classification for managerial roles where managers act
as figureheads and leaders for the organization.
Informational roles
Mintzberg’s classification for managerial roles where managers act as
the nerve centers of their organizations,receiving and disseminating
critical information.
Decision roles
Mintzberg’s classification for managerial roles where managers
initiate activities,handle disturbances,allocate resources and
negotiate conflicts.
Managerial Roles in Behavioral Model
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The Process of Decision-MakingStrategic decision making
Determining the long-term objectives, resources and policies of an
organization.
Management control
Monitoring how efficiently or effectively resources are utilized and how
well operational units are performing.
Operational control
Deciding how to carry out specific tasks specified by upper and middle management and establishing criteria for completion and resource
allocation.
Knowledge-level decision making
Evaluating new ideas for products, services, ways to communicate new knowledge, and ways to distribute information throughout the
organization.
Unstructured decisions
Non-routine decisions in which the decision maker must
provide judgement, evaluation, and insights into the problem
definition; there is no agreed-upon procedure for making such
decisions.
Structured decisions
Decisions that are repetitive, routine, and have a definite
procedure for handling them.
Types of Decisions
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Type of
decisionStructured
Semi-
structured
U n-
structured
Organizational level
Operational knowledge management Strategic
TPS
Office
systems
KWS
MIS
DSS
ESS
Cognitive style
Underlying personality dispositions toward the treatment of
information, selection of alternatives, and evaluation of consequences.
Systematic decision makers
cognitive style that describes people who approach a problem by structuring it in terms of some formal method.
Intuitive decision makers
Cognitive style that describes people who approach a problem with
multiple methods in an unstructured manner, using trail and error to find a solution.
Organizational models of decision making
Models of decision making that take into account the structural and
political characteristics of an organization.
Individual Models of Decision-Making
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Bureaucratic models of decision making
Models of decision making where decisions are shaped by the organization’s standard operating procedures(SOPs).
Political models of decision making
Models of decision making where decisions result from competition and bargaining among the organization’s interest groups and key leaders.
“Garbage can” model
Model of decision making that states that organizations are not rational and that decisions are solutions that become attached to problems for
accidental reasons.
Organizational Models of Decision-Making
What is Business Strategy?
• Organization has a limited set of resources (e.g. time, people, money, physical resources) and they must decide how to use those resources.
• Example: You have the following resources:– $500,000
– A building
– 10 employees
– A patent on new invention
Strategy is deciding what the organization is going to do and how it will use use its resources
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Examples of Strategies
• Strategy 1: manufacture equipment with the money
and use the building and the people to manufacture
widgets.
• Strategy 2: Outsource the production of widgets
and use the people and building to be widget
distributor - or perhaps a widget store.
• Strategy 3: Sell the patent to a larger firm, sell the
building, fire the employees and retire!
Strategy vs. Tactic
• Strategy focuses essentially on deciding on what the
organization is trying to do, what it is trying to become
within its business environment. Changing strategy is
difficult and often causes problems.
• Tactic is the implementation of the strategy. It is the set
of management decisions focussed on how to achieve
the strategic objectives.
• Example: once the organization decides that it wants to be a widget manufacturer, there are many decisions that must be made
about how to profitably manufacture widgets.
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Strategic Decisions
• Strategic decisions address questions such as:– What products or services will be provide?
– Will we focus on providing low cost goods/services?
– Will we focus on providing unique goods/services?
– Where will we sell our goods/services? To whom?
• IT can assist the strategic decision maker (e.g. ESS). More importantly, IT is likely to be critical to the implementation of the strategy.
Elements of Strategic Management
• Long range planning
• Responsive
management
• Innovation
Vision
Mission
Strategic
Managerial
Operational
Information
Technology
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The Role of IT
• Create systems that provide strategic advantage
• Supports strategic changes, such as
business reengineering
• Provides business intelligence
– Competitive intelligence
– Sustainable competitive advantage
Competitive Advantage
• What makes strategy difficult is that most
business environments are competitive. Need to
try to "second guess" the competition.
• Competitive advantage: what sets the firm apart
from the rest of its competitors.
• Basis for competition: cost, speed, quality,
variety, level of service,...
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Strategic Information Systems
• Strategic information systems
– computer systems at any level of an organization that
change the goals, processes, products, services, or
environmental relationships to help the organization
BUSINESSLow Cost producer Value chain analysis data mining
Differentiation of
products/services
IT-based products / services
Scope of competition
(global vs. niche)
Inter-organizational systems
supply chain management
efficient customer response
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Value Chain AnalysisValue Chain Analysis
Highlights the primary and support Highlights the primary and support activities that add a that add a margin of valuemargin of value to a firmto a firm’’s product/service where IS can s product/service where IS can best be applied to achieve a competitive advantage.best be applied to achieve a competitive advantage.
Primary activities:Primary activities:•• Activities most directly related to the production and Activities most directly related to the production and distribution of a firmdistribution of a firm’’s products/servicess products/services•• Consist of inbound logistics, operations, outbound Consist of inbound logistics, operations, outbound logistics, sales and marketing, servicelogistics, sales and marketing, service
Support activities:Support activities:•• Activities that make the delivery of primary activities Activities that make the delivery of primary activities possiblepossible•• Consist of organizationConsist of organization’’s infrastructure, human s infrastructure, human resources, technology, procurementresources, technology, procurement
The Value Chain for a Restaurant
• Each box represents a primary process
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IS to Support Product/Service Differentiation
• Product/service differentiation
– strategy for creating brand loyalty by
developing new and unique products/services
that are not easily duplicated by competitors
e.g. Citibank’s ATM
IS to Support Niche Focus• Focused differentiation
– strategy for developing new market niches for specialized products/services
– Data mining
• analysis of large pool of data to find patterns and rules that
can be used to guide decision-making and predict future behavior
e.g. direct marketing
Applications of Data mining
– Identifying individuals or organizations most likely to
respond to a direct mailing.
– Predicting which customers are likely to switch to
competitors.
– Identifying common characteristics of customers who
purchase the same product.
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IS to Support Low Cost Strategy• Supply chain management
– integrates supplier, distributors, and customer logistics requirements into one cohesive process
– to reduce inventory cost or underutilized staff
• e.g. Wall-Mart’s “continuous replenishment system”
– “lock in” customer and raise “switching costs”
• expense a customer incurs in lost time and expenditure of resources when changing from one supplier to a competing supplier
• e.g. Baxter Healthcare’s “stockless inventory”
Business Level Strategy
The Business Firm
Vendors Customers
Supply Chain
Management
Stockless Inventory
Continous Replenishment
Just-in-time delivery
Intra Firm Strategy
Product differentiationFocused differentiation
Low-cost producer
Efficient CustomerResponse
Point-of-sale systemsDatamining
Business Level Strategy
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Firm-Level Strategies
• A firm is a collection of business units
• Synergy
– outputs of some business units used as inputs to
other units
– IS to tie operations of business units
• Core competencies
– activities at which a firm is a world-class leader
– IS to encourage sharing of knowledge
Industry-Level Strategies
• Competition with other firms
• Cooperation through information partnership
– e.g. American Airlines and Citibank
• Models to help analysis
– Competitive forces
– Network economics
• based on concept of a network where adding another participant
entails no marginal costs but can create much larger marginal
gain
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COMPETITIVE FORCES MODEL
THE FIRMTRADITIONAL
COMPETITION
NEW
MARKET
ENTRANTS
Bargaining
power of
SUPPLIERS
Bargaining
power of
CUSTOMERS
SUBSTITUTE
PRODUCTS
& SERVICES
Managing Strategic Transitions
• A movement from one level of socio-
technical system to another. Often required
when adopting strategic systems that
demand changes in the social and technical
elements of an organization.
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Questions Managers Should Ask
• Forces at work in the industry and strategies
• Using information and communication technology
• The direction and nature of change within the industry
• Opportunities to be gained by introducing information systems technology
• Kinds of systems are applicable to the
• Being behind or ahead of the industry in its application of information systems
• The current business strategic plan, and the cur-rent strategy for information services
• Sufficient technology and capital to develop a strategic information systems initiative
