Management Information Systems: Solving Business Problems with Information Technology Part Two: Business Integration

1. Management Information Systems: Solving Business Problems with Information Technology Part Two: Business Integration Chapter Seven: Integration of Information: Model Integration Prof. Gerald V. Post Prof. David L. Anderson

2. Model • Specific Way of Looking at the World • specific and concrete • mathematical equations • subjective descriptions • financial models • consumer models • management models • Assist in Understanding More Complex Issues • enable comparison between model and actual results • Some Processes Defy Modeling • Too much variability or complexity

3. Dangers of Models • Number of Alternatives • Expense • Time • Difficulty to Mirror Reality

4. Biases in Decision-Making • Acquisition (input) • Processing • Output • Feedback

5. Re-Engineering • Analyze and Model the Entire Company • Make Major Changes to the Operation of the Business • Small Changes over Time can Actually cause a business to be misaligned with its Target

6. Decision Support Systems • Database • Collects • Model • Evaluates • Model should Directly Access Database • Different Brands of Software are Used for Each Component • Output • Produces • Graphs

7. Input and Output Variables • Input Variables • To Receive Data • Quantities of Raw Materials • Labor Hours • Money Invested in Capital Equipment • Identified by Statistical Techniques • Process Data • Output Variables • Profit • Quantity Produced • Quality Ratings

8. Software and Models • Generic Modeling Tools • SPSS or SAS • Decision Support System • Database Management System • Spreadsheets

9. Enterprise WideDecision Support Systems • Data Warehouse • focuses on single large server or mainframe that provides consolidation point for enterprise data from diverse production systems • architecture, usually based on relational database management system, used to maintain historical data that has been extracted from the operational data store • Data Mart • focuses exclusively on serving a distinct community of knowledge workers

10. Steps to a Data Warehouse • Determine needs of end users and model data that the data warehouse should contain • Identify necessary data sources from among the many corporate data sources • Analyze corporate data sources in depth, documenting functions and processes • Use information about corporate data sources to decide the transformation/integration logic • Develop the metadata, which identifies the source data, describes the transformation and integration, and defines the data model • Construct the physical data-warehouse database; populate Warehouse from various sources • Generate necessary end-user applications

11. Data Warehouse • Not Repositories for all Corporate Data • Not Separate, Read-Only Data Stores • Do not Require Relational Databases • Not always big

12. Four Processes for the Delivery of Decision Support Data • Extract all data relevant to the business decision-making processes of groups of knowledge workers for the specific production systems responsible for capturing that information. • Store the resulting data sets in one location: the data warehouse. • Develop a unique cut or series of cuts of the data warehouse for each knowledge worker community. • Supply the decision-support tools appropriate to the knowledge workers’ style of computing.

13. Management Processes Feedback • Long feedback cycles • Limited understanding of relationships among measures • Sequential & functional • Incomplete feedback; limited to no feedforward Results Control Personnel Control Action Control • Rigid contracts with suppliers • Rigid job descriptions, hiring criteria & standardized performance appraisals for employees • Process & job segmentation • Rigid procedures & policies • Direct supervision • Primarily financial • Internally oriented • Functional

14. Management Processes Feedback • Short feedback cycles • Relationships among measures preserved • Interactive & interfunctional Process Control • Information-Enabled • Process & work integration • Real-time access to a broad set of process performance • Interfunctional & interorganizational measures • Boundaries and Values • Clearly defined and communicated • Consistently enforced • Early warning systems • Action control for high risk operations Output Control • Broad set of internal & external measures • Benchmarking • Interfunctional & interorganizational Feedforward • Improved understanding of relationships among inputs, process, and outputs • Predictive models/causal models • Interactive scenario planning

15. Management Processes Feedback • Short feedback cycles • Relationships among measures preserved • Interactive & interfunctional Input Control (includes Personnel Control) Process Control • Information-Enabled • Process & work integration • Real-time access to a broad set of process performance • Interfunctional & interorganizational measures • Boundaries and Values • Clearly defined and communicated • Consistently enforced • Early warning systems • Action control for high risk operations Output Control • Supplier certification • Employee certification (advanced degrees, professional) & performance monitoring • Formal business intelligence systems • Broad set of internal & external measures • Benchmarking • Interfunctional & interorganizational Feedforward • Improved understanding of relationships among inputs, process, and outputs • Predictive models/causal models • Interactive scenario planning

16. Defining Direction Executing and Adapting Sustaining Value Units, groupings • Process Performance • Time • Quality • Cost • Flexibility • Innovation potential • Stakeholder Satisfaction • Employees/partners • Customers • Shareholders • Society • Benchmarks • Best of class • Best of breed • Reputation • Other • Sustainability • Resiliency • Flexibility Environmental context and resources Coordinating mechanisms Incentives Authority Formal and informal power Purpose, core values, and core competencies Information Strategy Boundary systems Operating processes Control Management processes Organizational context, resources, and leadership People Values and Behavior Work Technology

17. Complex ? Hierarchy (Control) Organization Entrepreneurial (Autonomy) Simple Stable Certain Dynamic Uncertain Environment

18. SCOPE OF CHANGE Incremental Change to a Process or Function Radical Change to Organizational or Interorganizational Strategy, Structure, Process, and Culture Intrafunctional Interfunctional Interorganizational LOW Episode #3 1991-1993 Team-based Organization Redesign Episode #1 1985-1988 Corporatewide Reorganization Urgency of Stimulus 1988-1991 Business Process Redesign Within Plant Episode #2 HIGH

19. SCOPE OF CHANGE Incremental Change to a Process or Function Radical Change to Organizational or Interorganizational Strategy, Structure, Process, and Culture Intrafunctional Interfunctional Interorganizational LOW Episode #2 1988-1990 Quality Mgmt. Urgency of Stimulus Episode #3 1992-1993 Bus. Unit #1 Restructuring 1991-1992 Business Process Reengineering 1991-1992 SBU Restructuring Episode # 1 1986-1988 Focused Redesign/Key Leveraged Areas 1985 Post-takeover Restructuring HIGH

20. SCOPE OF CHANGE Incremental Change to a Process or Function Radical Change to Organizational or Interorganizational Strategy, Structure, Process, and Culture Intrafunctional Interfunctional Interorganizational LOW 1991-1992 EDI Initiatives 1990-1993 Area Business Team Reorganized 1978-1980 Ideal Sales Org. Study & Ideal Mfg. Org. Study 1983-1986 Redesign of Field Sales, Distribution & Mfg. (separate initiatives) 1987-1988 Business Process Redesign Episode # 3 Urgency of Stimulus Episode # 2 Episode # 1 HIGH

21. Strategic and IS Planning Process IS Investment Plan Strategic Business Planning Strategic IS Planning CDS Critical Success Factors Strategic Goals SDM IS Products and Services Strategy VISION VBP CAS Competitive Social Political External Strategic Models

22. AGREEMENTS REACHED WORK COMPLETIONS REQUESTS COMPLETED AGREEMENTS REACHED

23. Traditional organizations Customer-driven organizations Product and service planning • Short-term focus • Reactionary management • Management by objectives • Long-term focus • Prevention-based management • Customer-driven strategic planning process Measure of performance • Bottom-line financial results • Quick returns on investment • Customer satisfaction • Market share • Long-term profitability • Quality orientation • Total productivity Attitudes toward customers • Customers are irrational and a pain. • Customers are a bottleneck to profitability. • Voice of the customer is important • Professional treatment and attention to customers are required. Quality of products and services • Provided according to organizational requirements • Provided according to customer requirements and needs Marketing focus • Seller’s market • Careless about lost customers • Increased market share and financial growth achieved through customer satisfaction. Process management approach • Focus on error and defect detection • Focus on error and defect prevention Product and service delivery attitude • It is OK for customers to wait for products and services. • It is best to provide fast-time-to-market products and services People orientation • People are the source of problems and are burdens on the organization. • People are an organization’s greatest resource. Basis for decision making • Product-driven • Management by opinion • Customer-driven • Management by data Attitudes toward customers • Hostile and careless • “Take it or leave it” attitude • Courteous and responsive • Empathic and respectful attitude Improvement strategy • Crisis management • Management by fear and intimidation • Continuous process improvement • Total process management Mode of operation • Career-driven and independent work • Customers, suppliers, and process owners have nothing in common • Management-supported improvement • Teamwork between suppliers, process owners, and customers practiced.

24. Information Technology Development Effort “Knowledge networks” Scope of electronic integration “Strategic alliances” “Standard business contracts” “EDI” Tightly coupled Expertise Collaborative advantage Business network redesign Process linkages Business governance Inventory triggers Electronic infrastructure Competitive advantage Loosely coupled Transactions Common role Unique role IT governance

25. Conventional and IT Design Variables Class of variable Conventional and design variables Source IT design variables Definition of organizational subunits Determining purpose, output of subunits Reporting mechanisms Linking mechanisms Control mechanisms Staffing Tasks Workflows Dependencies Output of processes Buffers Formal channels Informal communications/ collaboration Make versus buy decision Exchange of materials Communications mechanisms Nadler and Tushman; Galbraith; Thompson Nadler and Tushman; Galbraith; Thompson Nadler and Tushman; Mintzberg Galbraith; Nadler and Tushman Nadler and Tushman Mintzberg Nadler & Tushman Nadler & Tushman Thompson Galbraith Mintzberg Mintzberg Mintzberg Virtual components Electronic linking Technological leveling Production automation Virtual components Electronic communications Technological metrixing Electronic customer/ supplier relationships Electronic customer/supplier relationships Electronic linking Structural Work process Communications Interorganizational relations

26. IT Design Variables and Four Prototypical Organizations Vertically integrated conglomerates Negotiated organizations Virtual Traditional Virtual components Electronic linking and communications Technological matrixing Technological leveling Electronic workflows Production automation Electronic customer/ supplier links Substitute electronic for physical components Essential part Participate in matrixed group Use to supervise remote workers and groups Crucial part of strategy NA Used extensively Substitute electronic for physical components Essential part Use for coordination NA Crucial part of strategy Communicate designs Used extensively Use to replace isolated components Optional Use for various groups Use to reduce layers of management Use where applicable to restructure work Use where applicable Potentially important Force components into electronic subsidiary Essential part Use for coordination and task forces Use to reduce layers of management Key to coordinating work units Coordinate production among work units Key to operations

27. Three Generic Strategies Strategic Advantage Uniqueness Perceived by the Customer Low Cost Position OVERALL COST LEADERSHIP Industrywide DIFFERENTIATION Strategic Target Particular Segment Only FOCUS

28. Focus Elements of a Customer- and Market-Driven Enterprise Design and product quality Commitment to customer satisfaction Human resource development Total quality care Error prevention philosophy Total quality solution Competitive market-driven enterprise Market-driven quality and productivity technologies for continuous improvement Quality management and supervision Quality services Personal quality Productivity efficiency and effectiveness

29. 1 2 Convince top management of benefits of becoming market driven. Communicate and demonstrate management’s commitment. 10 Success factors Top management leadership and commitment Continuous improvement focus Continuous education and training Continuous recognition and reward Participative management and employee empowerment 3 Establish focal point and recruit other qualified individuals. Monitor progress toward objectives. 9 4 Develop customer commitment throughout enterprise. Increase amount of customer-oriented interdepartmental teamwork. 8 Develop new improvement programs with customer-oriented professionals. 5 Introduce market-driven strategic planning process. 7 6 Create and use market-based performance measures. Apply tools of market research, auditing, marketing training, and consulting. Steps to Becoming a Customer- and Market-Driven Enterprise

30. The Wheel of Competitive Strategy Target Markets Product Line GOALS Definition of how the business is going to compete Objectives for profitability growth, market share, social responsiveness, etc. Finance and Control Marketing Research & Development Sales Distribution Purchasing Labor Manufacturing

31. Context for Competitive Strategy Company Strengths/Weaknesses Industry Opportunities/ Threats External Factors Internal Factors Competitive Strategy Personal Values Societal Expectations

32. Cost leadership • Differentiation • Innovation • Linkage Corporate Strategy Development • expectations • goals • rivalry Business Strategies and Priorities monitor rivals • strengths • weaknesses • opportunities • critical success factors • Re-engineering • Organization • Decentralization Process Changes Data Needs IS Changes • Performance Measures • ROA • EPS • Subjective • ROI • Growth System Development & Implementation • Market Measures • Market share • Concentration • Growth • Profitability Business Operations & Rules Existing Data and IS Developing Strategies. Market measures and firm performance are used to highlight problems and opportunities. Corporate straightedges are developed from process improvements and innovations. Potential strategies are evaluated and prioritized. Processes are re-engineered and new systems are designed and implemented.

33. Formulation (Deciding what to do.) Implementation (Achieving results.) 1. Organization structure and relationships. Division of work. Coordination of divided responsibility. Information systems. 1. Identification of opportunity and risk. Corporate Strategy Pattern of purposes and policies defining the company and its business 2. Determining the company’s material, technical, financial, and human resources. 2. Organizational processes and behavior. Standards and management. Motivation and incentive systems. Control systems. Recruitment and development of managers. 3. Personal values and aspirations. 3. Top leadership. Strategic. 4. Acknowledgment of noneconomic responsibility to society. Organizational. Personal. Strategy analysis. Strategy determines the identity of a firm. Formulating strategies is only the first step. As an effective manager, you must also be able to implement strategies.