MIS 301 Information Systems in Organizations

1. MIS 301Information Systems in Organizations Dave Salisbury salisbury@udayton.edu (email) http://www.davesalisbury.com/ (web site)

2. What We Will Cover: • Businesses as Open Systems • How Businesses Organize to Create Value • The Value Chain • Applying IT to Create Business Value • Strategically Fitting IT to the Organization: A Business Example

3. Student ROI (Return on Investment) • Your investment of time and effort in this course will result in your being able to answer these questions: • Why can organizations be thought of and modeled as open systems? • How are organizations structured to optimize business value? • How do value chains related to business organizations? • In what ways can organizations apply IT to build business value? • How can businesses strategically fit IT to the organization?

4. Businesses as Open Systems • A business operates by transforming inputs into outputs and constantly interacting with its environment

5. Stakeholders and Boundaries • A stakeholder is a person or entity that has an interest and an influence on how a business will function in order to succeed. • A stakeholder can be external or internal relative to the business. • All open systems have an organizational boundary which separates them from their environment but still allows them to interact with their environment.

6. Organizational Stakeholders

7. The Business Process • To transform inputs into outputs (goods and services), organizations need to perform a series of steps known as a business process. • Manufacturing processes directly create output in the form of a product. • Other processes create a service.

8. Inputs to Open Systems Organizations

9. Feedback • Feedback is a special form of output created by a business process that is returned to the system (“fed back”). • The output returned to the system is used to control the system’s future input, processes, and outputs. • Businesses use feedback to monitor the efficiency and effectiveness of a given process. • Businesses must stay alert to their environment as well as to their business processes.

10. What is a System? Environment Control by Management Feedback Signals Feedback Signals Control Signals Control Signals Input of Raw Materials Output of Finished Products Manufacturing Process System Boundary Other Systems

11. What is an Information System? System to Support a Business Process Feedback/Control Input of Data Resources(Forms) Data Processing(Updates,Queries) Output of Information(Reports) Data Storage

12. System to Support a Business Process Input of Data Resources(Forms) Data Processing(Updates,Queries) Output of Information(Reports) Network People Data Storage Software Data Hardware Other Systems IS Components/Resources

13. Systems Interact w/ Other Systems

14. The Inter-Networked Business The Internet Suppliers and Other Business Partners Company Boundary Procurement, Distribution, and Logistics Engineering & Research Accounting, Finance, and Management Manufacturing and Production Extranets Intranets Advertising Sales Customer Service Extranets Consumer and Business Customers

15. Technology versus Systems • Technology • Computers • Telephones • Tools • Systems • Intelligent application of technology along with people and procedures to do something useful

16. Organizing to Create Value • All business organizations possess structures that organize information, responsibility, and authority. • Types of organizational structures include functional, decentralized, and matrix structures. • In functional and decentralized structures lines of authority are vertically oriented. • A matrix organization is a blend of functional and decentralized organizations that uses teams.

17. Organizational Structures

18. Advantages of Organizational Forms

19. Disadvantages of Organizational Forms

20. The Value Chain • The value chain is a connected series of activities, each of which adds value or supports the addition of value to the firm’s goods and services1. • Every action an organization takes, from securing the necessary raw materials (input), to making the goods or service (process), to completing a transaction with a customer (output), is either a primary activity or support activity. • A transaction is an exchange of goods or services (value) between two or more parties. 1Porter, M. E., “How competitive forces shape strategy.” Harvard Business Review, 1979, pp. 137-145

21. An Organizational Value Chain

22. Primary Activities • Primary activities are directly related to the production and distribution of the organization’s products and services that create business value for the organization and its customers.  • Example primary activities include inbound logistics (obtaining raw materials), operations (creating the product), outbound logistics (shipping the product), and marketing, sales, and service (selling the product).

23. Support Activities • Support activities are value chain activities that an organization conducts to support the creation of business value. • Support include administration, technology development, human resource (HR) management, and procurement. • An organization’s value chain is the sum of its primary and support activities working together to create business value. • The value chain is another way to view the organization as a system (inputs  processes  outputs). • The value chain is also a useful tool for defining an organization’s core competencies and the activities it can pursue to gain a sustained competitive advantage.

24. Through the intelligent use of IT, a business can increase its competitive advantage. IT Support for the Value Chain

25. IT Support for the Value Chain • Some IT and systems are specific to particular parts of the value chain or departments. • Other systems, known as enterprise-wide systems, support and are used by the entire enterprise through a centralized database and coordinated software modules. • IT can support almost every activity in the organization as well as helping to transform and integrate differing aspects of the value chain.

26. Applying IT to Create Business Value • IT can be applied to value chain activities to create business value in 3 ways: automating, informating, and transforming. • Automating uses technology to perform tedious or repetitive tasks faster, cheaper, more consistently, and with greater accuracy. • Typically, the organization uses technology to do the same things are before, but with greater efficiency and accuracy. • Later, the organization looks to use technology to do new things.

27. Using IT Automation to Create Business Value

28. Applying Automation • When applying automation within an organization to a single process, management considers answers to questions such as: • What is the main goal, and what are the steps of the process? • What data and information are required to carry out the process? How does data flow between the steps? • How is the process affected by other processes? When should it occur? What starts it? How does the output effect other processes?

29. Automating Cash Withdrawal Process

30. Informating to Do Things Better • Another way to view the application of IT is known as informating. • Informating is recognizing the executing process also creates new data and information. • An organization can then process these new data to improve its decision making or improve the process itself. • With an informating view, IT can deliver more long-term benefits than from automation alone. • To use informating, businesses need to determine if IT stores data that can be used for learning and decision-making.

31. Added Benefits of Informating

32. Transforming to Gain Competitive Advantage • Since one of the primary goals of a business’s strategy is achieve a sustainable competitive advantage, most businesses have a transforming view of IT. • This view seeks to use IT to acquire or continue a competitive advantage over competitors. • There are two ways to obtain a competitive advantage: cost and differentiation. • A company gains a cost advantage when it delivers the same benefits to customers as its competitors at a lower cost. • A company gains a differentiation advantage when it delivers superior benefits to customers.

33. A Resource-Based View • With a resource-based view, a company gains competitive advantage through the development of distinctive competencies. • A company gains its distinctive competencies from a combination of its capabilities and its resources.

34. Using Distinctive Competencies & IT • Distinctive competencies enable innovation, product quality, process efficiency, and customer responsiveness. • IT can assist in all of these areas. • Through automation with IT, a business can achieve a lower cost structure. • Through informating with IT, a business can learn new ways to increase or transform its capabilities in order to differentiate its products.

35. Can Companies Gain a Unique Competitive Advantage with IT? • A widely held view during the late 1990s and early 2000s was that companies can gain a unique competitive advantage with IT. • Dr. Nicolas Carr argued that since the core functions of IT are available and affordable to all companies, it isn’t possible to gain competitive advantages with IT alone. • If a company can automate a particular process, so can its competitors. • Competitive advantage only comes from doing things other companies can’t do. • A widely held view is that competitive advantage comes from the intelligent application of IT to support business strategies and to leverage distinctive competencies.

36. IT as advantage vs. necessity • Strategic Advantage • If you’re first, a novel technology creates an advantage • Strategic Necessity • Eventually, technology-based gains are lost because they are easily replicable

37. Information TechnologySupports Strategic Management • Innovative applicationsCreate innovative applications that provide direct strategic advantage to organizations. • Competitive weaponsInformation systems themselves are recognized as a competitive weapon • Changes in processesIT supports changes in business processes that translate to strategic advantage • Links with business partnersIT links a company with its business partners effectively and efficiently.

38. Porter’s Competitive Forces Model Threat Bargaining Power Bargaining Power Threat

39. Operational effectiveness Customer-orientation Entry-barriers Lock in customers or suppliers Increase switching costs Cost Leadership Differentiation Niche Growth Innovation Alliance Sample Competitive Strategies

40. Information TechnologySupports Strategic Management • Cost reductions: IT enables companies to reduce costs. • Relationships with suppliers and customers: IT can be used to lock in suppliers and customers, or to build in switching costs. • New products: A firm can leverage its investment in IT to create new products that are in demand in the marketplace. • Competitive intelligence: IT provides competitive (business) intelligence by collecting and analyzing information about products, markets, competitors, and environmental changes

41. Current Competitors What drives them? Actions & capabilities Strengths & weaknesses Competitive intensity Barriers to Entry What are they? Current basis for competition? How to build share? Substitutes What are they? Are they increasing? Are they really substitutes? Buyers & Suppliers Who has power in the transaction? Who captures value added for each part of the value chain? Competitive Assessment

42. Strategically Fitting IT to the Organization • Four views of a how a business can derive benefit by applying IT to the organization: • Support of the value chain; • Automating; • Informating; • Gaining a competitive advantage. • When applying IT, organizations must consider: • interaction of technology with people who create and use it • the organizational structure and culture • the business processes, • the environment within which the organization resides. • Failure of IT often results from applying technology in a way that fits poorly with other organization components.

43. IT Application Newspaper Example