Download - Ch01

1.1 © 2006 by Prentice Hall

1Chapter

Managing the Digital Managing the Digital FirmFirm

Managing the Digital Managing the Digital FirmFirm


OBJECTIVES

Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm

• Islamic Principles in Managing Organization

• Explain why information systems are so important today for business and management

• Evaluate the role of information systems in today’s competitive business environment

• Assess the impact of the Internet and Internet technology on business and government


• Define an information system from both a technical and business perspective and distinguish between computer literacy and information systems literacy

• Identify the major management challenges to building and using information systems

OBJECTIVES (Continued)



Introduction

• According to Islamic fundamentals, an individual will be ultimately accountable to Allah.

• Given this dictum (saying), the individual needs to implement the defined codes of ethics and style, in managing oneself and others.

• Implementing the imperatives of total quality management will follow automatically because these are inherent in the Islamic way of life.

ISLAMIC PRINCIPLES IN THE MANAGEMENT OF AN ORGANIZATION: A FOCUS ON LEADING


• Successful managers perform five basic managerial functions to achieve corporate goals:

Planning Leading

Organizing Staffing

Controlling

Management Principles and Islam



• In addition, Henri Fayol has developed fourteen management principles:

• Division of work• Authority• Discipline• Unity of command• Unity of direction• Subordination of individual

interests to the general interest•

• Remuneration

• Centralization

• Scalar chain

• Order, equity and stability

• Tenure of personnel

• Initiative

• Esprit de corps


• In the current presentation, I would tackle the function of leading from the Islamic perspective.

• My reasons for selecting the same are :

– The importance of the concept in management and politics; leadership is an important aspect of managing.

– The leadership crisis the Muslim World is going through for many years.

– The abundant literature in Islam regarding leadership that needs people to put it in use and practice it faithfully.



TQM and Islam

• Shura• Participative

Management and Employee Involvement

• Proficiency and Efficiency (Ihsan)

• Sincerity (Ikhlas)

• Total Quality Management – TQM is a management

concept

– to reduce the errors produced during the manufacturing or service process, increase customer satisfaction, streamline supply chain management


• Distinguishing between fact and belief

• Defining issues in moral terms

• Applying moral principles to a situation

• Establishment of justice

• Practice of beneficence

• Promoting good and forbidding evil

Management Ethics


• Defining Leadership

• Western Models of Leadership

• Current Trends in Leadership

• Power and the Leadership

Leadership: An Overview


• Posner and Kouzes five-stage model for leadership– Challenging the Process– Inspiring a Shared Vision– Enabling Others to Act– Modeling the Way– Encouraging the Heart

Effective Leadership in Islam


Effective Leadership in Islam

• Abul-Ainain proposes ten characteristics of an effective leader from Islamic perspective as:

• Strength of character

• Role model

• Equity and impartiality

• Kindness and magnanimity

•

• Integrity

• Guidance

• Consultation

• Unselfishness

• Competence

• Intelligence and wisdom


• Islamic approach is goal-oriented with comprehensive, moderate, practical, evolving, spiritual, behavioral, ethical, social, and economic objectives

• The organization should be one in which learning and tazkiyyah are an integral part of its culture.

• Within the parameters of Islam, the employees are encouraged to engage in planned and self-initiated activities.

• A combination of both will give them a sense of direction and challenge as they try their best fi sabil lillah (for Allah's sake).

Islamic Perspective of Leadership


• The verses of Surat An-Naml are just one example of the many functions, roles, processes, and procedures of management mentioned in the Qur’an.

• Also, the Sunnah of the Prophet Muhammad (saw) has a lot of lessons in the field of management.

• In brief, the verses 15-44 of Surat An-Naml demonstrate a detailed analysis of the leader’s action and behavior with his followers.

Surat An-Naml and Principles of Leadership


• Looking after and observing the absences of a follower (27:20)

• Theory and practice of gradual punishment (27:21)– hard punishment– severe punishment– plain excuse



• Communication (oral) (27:22-26)

• Verification of communication (truth or lie) (27:27)

• Written communication (letter to Balqis) (27:28-31)



• Observation by the messenger (27:28)

• Shura and consultation (the Queen and her chieftains) (27:32-34)

• Advise of the chieftains to the leader (27:33)



• Gifts and their use in management and administration (27:35)

• Refusal of gifts if it looks like a bribe (27:36-37)

• Employing super talented individuals (27:38-41)



• Pre-qualification and Testing (27:41)

• Perception, Wisdom and Analysis (27:42-43)

• Recognition of Facts and Acting upon them (27:44)

•



• We examined the Islamic perspective as related to the principles of management and leadership in modern theory and practice

Illustrations from the Qur’anic verses and sayings and practices of the Prophet Muhammad (saw) and his true followers, what constitutes leading

Conclusion


Managing the Digital FirmManaging the Digital Firm


• Ask managers to describe their most important resources and they'll list money, equipment, materials, and people — not necessarily in that order.

• It's very unusual for managers to consider information an important resource, and yet it is.

• As electronic business and electronic commerce grow in popularity and more firms digitize their operations, having useful information is becoming even more important to the global business community.

Why Information Systems Matter Why Information Systems Matter


WHY INFORMATION SYSTEMS?


• Capital managementCapital management

• Foundation of doing businessFoundation of doing business

• ProductivityProductivity

• Strategic opportunity and advantageStrategic opportunity and advantage

Why Information Systems Matter Why Information Systems Matter

There are four reasons why IT makes a difference to the success of a business:



• IT is the largest single component of capital investment in the United States.

• About $1.8 trillion is spent each year by American businesses.

• Managers and business students need to know how to invest this capital wisely.

• The success of your business in the future may well depend on how you make IT investment decisions.

Capital Management: Capital Management:




Information Technology Capital Investment Information Technology Capital Investment

Figure 1-1


Source: Based on the data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Tables 5.2 and 5.8, 2004.



• Most businesses today could not operate without extensive use of information systems and technologies.

• there are very few businesses and organizations that do not currently use some form of information technology

• IT can increase market share.• IT can help a business become a high-quality,

low-cost producer.• IT is vital to the development of new products.

Foundation of doing business:Foundation of doing business:




The Interdependence between Organizations andThe Interdependence between Organizations andInformation Systems Information Systems

Figure 1-2




• IT is one of the most important tools managers have to increase productivity and efficiency of businesses.

• According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last decade. For firms this means IT is a major factor in reducing costs.

• It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For firms this means IT is a major source of labor and capital efficiency.


Productivity:



• Create competitive advantage: IT makes it possible to develop competitive advantages.

• New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-order business model that other firms have not been able to imitate.


Strategic Opportunity and Advantage:



• Create new services: eBay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success.

• Differentiate yourself from your competitors: Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.


Strategic Opportunity and Advantage:



• Carr has written that whatever advantages firms build using IT can be easily copied by competitors.

• This view is not supported by the evidence: Amazon, eBay, Dell, Wal-Mart and Apple's iTunes are just a few firms that have built and maintained technology-based advantages.

How Much Does IT Matter?




• Commoditization of technology is typically a spur to innovation and new business models, products and services.

• Competitive advantage derives not from the technology, but on how businesses use the technology.

• Innovations in business processes, management and organization are not easily copied from one firm to another.

How Much Does IT Matter?




Why IT Now? Digital Convergence and the Changing Business Environment

Technology, to a large extent, has driven organizations to change the way they operate and that includes the way they manage.

We're going to take an in-depth look at how organizations work and how they've been transformed by technology.




Growing impact of IT in business firms can be assessed from the following five factors:

• Internet growth and technology convergence• Transformation of the business enterprise • Growth of a globally connected economy• Growth of knowledge and information-based

economies• Emergence of the digital firm


Why IT Now? Digital Convergence and the Changing Business Environment (Continued)



• Growth of the Internet: 120 million online in the United States, 500 million global users

• The Internet is bringing about a convergence of telecommunications and computing: VoIP telephones.


The Internet and Technology Convergence:



• Growth in e-business, e-commerce, and e-government

• Internet is bringing about rapid changes in markets and market structure: financial services and banking such as eTrade.com.

• The Internet is making many traditional business models obsolete: the corner music store and video store.


The Internet and Technology Convergence:



• Technology, to a large extent, has driven organizations to change the way they operate and that includes the way they manage.

• We're going to take an in-depth look at how organizations work and how they've been transformed by technology.


Transformation of the Business Enterprise:



• When u purchase any product, look at the print and see where it’s made

• Could be China, Philip, America, US• Many manufacturing jobs are being move from US• Many new jobs are in IT industry, which service

whole new market that didn’t exist before• Its being made possible by technology• And it’s important to understand how to use IS

technology instead just a computer tech.• There’s a difference


Globalization:



• In a Knowledge and information-based economies, knowledge and information key ingredients in creating wealth

• Now, new products and services created and have better working condition, better pay & more advtgs

• Just equipped to the situation• Knowledge as a central productive and strategic asset• Eg farmers using GPS on their farm and ranches to

increase crop yields or reduce workload


Rise of the Information Economy:



• When a firm goes digital, it's not about just adding a computer system to the mix.

• Throwing a computer system at outdated business processes is exactly the wrong thing to do.

• A truly digital firm has several characteristics that distinguish it from most of the firms claiming to be digitized:


Emergence of the Digital Firm:



1. Significant business relationships are digitally enabled and mediated

2. Core business processes are accomplished through digital networks and span the entire organization

3. Key corporate assets are managed digitally4. Internal and external environments are quickly

recognized and dealt with


Emergence of the Digital Firm (Continued):



The Emerging Digital Firm The Emerging Digital Firm

Figure 1-4



• Too often you hear someone say, "Oh yeah, I know how to use a computer.

• I can surf the Web with the best of them and I can play Solitaire for hours.

• I'm really good at computers." Okay.

• So that person can pound a keyboard, use a mouse at lightning speed, and has a list of favorite Web sites a mile long.

• But the real question is: "Is that person information literate?

What Is an Information System?


• Most of us think only of hardware and software when we think of an information system.

• There is another component of the triangle that should be considered, and that's the people side or "persware"



PERSPECTIVES ON INFORMATION SYSTEMS



Technology perspective:Technology perspective: A set of interrelated

components that collect (or retrieve), process, store, and

distribute information to support decision making and

control in an organization




What is an Information System? (Continued)

• Data: Streams of raw facts representing events such as business transactions

• eg counter in supermarket scan millions of data such as bar codes, that describe products

• Information: Clusters of facts meaningful and useful to human beings in the processes such as making decisions




Data and Information

Figure 1-5


• An IS contain information about organization and surrounding environment

• 3 basic activities: input, processing, output – produce the info needed

• Feedback is output returned to people or activities in organiza

• Environmental actor such as customers, suppliers, competitors, stockholder, regulatory agencies interact with organization and its IS



Functions of an Information System




Functions of an Information System

Figure 1-6



• Rely on computer hardware and software Rely on computer hardware and software

• Processing and disseminating informationProcessing and disseminating information

• Fixed definitions of data and proceduresFixed definitions of data and procedures

• Collecting, storing, and using informationCollecting, storing, and using information


Computer-Based Information System (CBIS)



• Information systems are an organizational and Information systems are an organizational and management solution to business challenges that arise management solution to business challenges that arise from the business environment.from the business environment.


Information systems are more than just technology. Businesses invest in IS in order to create value and increase profitability.

A Business Perspective on Information Systems



• Based on information technology but also require Based on information technology but also require significant investment in organizational and significant investment in organizational and management changes and innovationsmanagement changes and innovations

• IS create value primarily by changing business IS create value primarily by changing business processes and management decision making. processes and management decision making.


A Business Perspective on Information Systems (Continued)




The Business Information Value Chain

Figure 1-7




Information Systems Are More than Computers

Figure 1-8



• Information systems literacy:Information systems literacy: Broad-based understanding of information systems that includes behavioral knowledge about organizations, management and individuals using information systems as well as technical knowledge about computers

• Computer literacy:Computer literacy: Knowledge about information technology, focusing on understanding how computer technologies work




• Sales and marketingSales and marketing

• ManufacturingManufacturing

• FinanceFinance

• AccountingAccounting

• Human resourcesHuman resources


Major Business Functions Rely on Information Systems



Three Important Dimensions of Information Systems

• Organizations

• Managers

• Technology


You will need to understand and balance these dimensions of information systems in order to create business value.

Dimensions of Information Systems



• The larger the organization, the more formal the management structure, including the need for standard operating procedures (SOPs).

• SOPs can help streamline standard business processes so that managers and employees can properly complete their tasks in a more efficient manner.

• Many companies now integrate these business processes into their information systems to ensure uniformity, consistency, and compliance.


The Organizational Dimension of Information Systems


• a business organization requires different employees to help it succeed.

• Knowledge workers help create new knowledge for the organization and data workers help process the paperwork necessary to keep an organization functioning.

• Without production or service workers, how would the company get its products and services to the customer?

The Organizational Dimension of Information Systems



• Every good organization needs good managers. • Their real role is to develop the game plan by

analyzing their team's strengths and weaknesses• they also determine the competition's strengths and

weaknesses. • That plan may change as the game progresses, but

managers pretty much know what they're going to do if they are losing or if they are winning.

• The same is true in workplace organizations.


The Management Dimension of Information Systems




The Management Dimension of Information Systems (Continued)

•In every organization you'll find senior managers making long-range decisions, middle managers carrying out the plans and goals set by senior managers, and operational managers handling the day-to-day operations of the company. •As we'll see, information systems output must be geared to each of these levels of management.•Managers who can understand the role of information systems in creating business value are the key ingredient to success with systems, and cannot easily be replicated by your competitors.


• The fastest and biggest change in modern computing is the Internet.

• To say that the Internet is transforming the way we live, work, and play is probably the greatest understatement in years.

• Businesses can create new opportunities, but they can also lose opportunities just as quickly.

• Now an organization has to design new systems, or transform old ones, with not just the company in mind, but 100 million other users of the Internet, extranets, and intranets.

• They have to decide how much or how little information to provide, in what way, with what level of access, and how best to present it.

The Technology Dimension of Information Systems



• HardwareHardware:: Physical equipment Physical equipment

• Software:Software: Detailed preprogrammed instructionsDetailed preprogrammed instructions

• Storage:Storage: Physical media for storing data and the Physical media for storing data and the softwaresoftware


Information technology is one of the tools managers use to cope with change:

The Technology Dimension of Information Systems



• Communications technology:Communications technology: Transfers data Transfers data from one physical location to anotherfrom one physical location to another

• Networks:Networks: Links computers to share data or Links computers to share data or resourcesresources


The Technology Dimension of Information Systems (Continued)

Managers need to know enough about information technology to make intelligent decisions about how to use it for creating business value.



• Technology and its associated information systems are now integrated throughout the organization.

• Everyone is concerned about its role and impact on their work activities.

• End users take on greater responsibility for the success of the information systems and are actually doing a lot of the work that belonged to the techies.

• Even the executive levels of an organization can no longer ignore the technology as they realize the importance of managing their organizational and management capital.

Complementary Assets and Organizational Capital


• As a firm becomes more digital, its information system continues to extend beyond the traditional role of serving the employees.

• Developing the complementary assets associated with the information systems such as developing new business processes, emphasizing employee training in technology, and creating new partnerships with suppliers, customers, and even competitors, is proving to be a daunting task.




•But the plain fact is that organizations, especially larger ones, just can't change as fast as the technology.• Companies make huge investments not just in hardware, but in software and persware. •Training people, building new operating procedures around technology, and changing work processes take far longer than the technological pace will allow.



• There are several different approaches to information systems: technical, behavioral, and sociotechnical.

• Think of this analogy: A "techie" looks at most things associated with computing as a series of zeroes or ones.

• Neither approach is better than the other, depending on the situation.

• Neither approach is more right than the other, depending on the situation.

Contemporary Approaches to Information Systems


• An organization can't afford to view its information resources as belonging to either the techies (technical approach) or the non-techies (behavioral approach).

• Responsibility for information belongs to everyone in the organization.

• This is the sociotechnical approach — a combination of the two approaches.

• Everyone has to work together to ensure that information systems serve the entire organization.

Contemporary Approaches to Information Systems

• Developing a new product, fulfilling an order, and hiring a new employee are examples of business processes.

• Answer: TRUE

Test Yourself

• The dimensions of information systems are management, organizations, and information technology.

• Answer: TRUE

Test Yourself

• An information system can be defined technically as a set of interrelated components that collect, process, store, and distribute information to support

A) decision making and control in an organization.

B) communications and data flow.

C) managers analyzing the organization's raw data.

D) the creation of new products and services.• Answer: A

Test Yourself

• The three activities in an information system that produce the information organizations use to control operations are

A) information retrieval, research, and analysis.

B) input, output, and feedback.

C) input, processing, and output.

D) data analysis, processing, and feedback.• Answer: C

Test Yourself

• Output

A) is feedback that has been processed to create meaningful information.

B) is information that is returned to appropriate members of the organization to help them evaluate the input stage.

C) transfers data to the people who will use it or to the activities for which it will be used.

D) transfers processed information to the people who will use it or to the activities for which it will be used.

• Answer: D

Test Yourself