Lecture 2
The use of Information systems in
business processes
The Organisation
Organisational
Problem
Organisational
Level
Strategic
Senior Management
General or Middle
Management
Tactical
Knowledge or Data
Workers
Knowledge
Operations
Production Workers
P ro duct io n
Fin an ce/
Sales/
Hum an
acco un t in g
m ark et in g
Reso urces
A business process
• A business process is a set of logically related
tasks & behaviors that organization develop to
produce specific business results and the
manner in which these activities are organized
and coordinated.
• ” these activities are designed to produce a
specific output for a particular customer or
market” and give the firm a competitive
advantage in order to generate revenue.
3
Some core Business Processes
• Sales/Marketing:
– Customer Strategy & Relationships (Marketing)
– Customer Acquisition (Sales)
• Finance and accounting
– Financial Analysis, Reporting, & Capital
Management
– Management Responsibility
– Accounting Management
Some core business processes
• H.R.
– Employee Development & Satisfaction
• Production
– Product Development
– Product/Service Delivery
• Technology Management
The Digital Firm
• A company/organisation/firm in which all
business process with customers, suppliers and
employees are digitally “managed”.
• Corporate assets: intellectual property and core
competencies (activities and resources that could
give a competitive advantage), financial and
human assets are digitally managed.
• These firms sense and respond to environmental
changes rapidly as any information is available
anytime and anywhere.
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The digital firm
• Two implications are:
– Time shifting refers to business being conducted
continuously, 24x7, rather than in narrow "work
day" time bands of 9 a.m. to 5 p.m.
– Space shifting means that work takes place in a
global workshop, as well as within national
boundaries.
Strategic Business Objectives of IS
• Ideally the objectives of Information's systems
are the Interdependence between a firm’s
ability to:
– Use information technology
– Implement corporate strategies and achieve
corporate goals
8
Strategic Business Objectives of IS
• Six Strategic Business objectives include:
– Operational Excellence
– New products, services and business models
– Improve customer and supplier relations
– Improved decision making
– Competitive advantage
– Survival
9
Operational Excellence
• Improvement of efficiency to attain higher profitability
• Information systems, technology an important tool in achieving
greater efficiency and productivity
• Companies that pursue operational excellence provide
consumers with products at the lowest total cost but the same
quality.—operational excellence demands zero defects.
• Procedures for manufacturing pursue the highest level of
efficiency, often using IT to track inventory and orders.
• A “Customer service” product pursues the highest level of
convenience, with the goal of making every customer
interaction easy, pleasant, quick, and accurate
• Wal-Mart, McDonalds, Dell, and Ryanair are examples of
companies that pursue, arguably, operational excellence.
Operational excellence example
• Retaillink Walmart’s system used to tracks and
store all point of sales data for the company.
• Walmart handles more than 1m customer
transactions every hour and stores of over 2.5
petabytes (1000 terabyte) of data
• A large amount of this data
is available to Walmart supplier who can
register for access to their companies
information.
• This allows companies to accurately track sales,
manage inventory, review forecasts, and perform
a variety of granular analysis to improve their
business.
New products, services, and business
models:
• Describes how company produces, delivers, and
sells product or service to create wealth [ensure a
competitive advantage]
• Information systems and technology are major
enabling tools for “new products, services,
business models”
• E.g. Apple’s iPod, iTunes and Netflix’s Internet-based
DVD rentals
• Can you think of any other examples?
Customer and supplier intimacy:
– Serving customers well leads to customers
returning, which raises revenues and profits
• E.g. large hotels that use computers to track
customer preferences and subsequently use to
monitor and customize environment
– Intimacy with suppliers allows them to provide
vital inputs, which lowers costs
• E.g. Wal Marts or that of most big retail firms’
information system which links sales records to
contact manufacturer. Can assist in “just in time”
production
Improved decision-making
• Without accurate information:
 Managers must use forecasts, best guesses, luck
 Leads to:
 Overproduction, underproduction of goods and services
 Misallocation of resources
 Poor response times
 Poor outcomes raise costs, lose customers
Competitive advantage
–
–
–
–
Delivering better performance
Charging less for superior products
Responding to customers and suppliers in real time
Often achieved when firm achieves one of first four
advantages
– E.g. Dell: Consistent profitability over 25 years; Dell
remains one of the most efficient producer of PCs in
world.
– But Dell has lost some of its advantages to fast
followers-- HP
Survival
• Information technologies as necessity of business
• May be:
• Industry-level changes, e.g. Citibank’s introduction of
ATMs
• Governmental regulations requiring record-keeping
Information Systems
• Information Technology: All hardware and software that
a firm needs to achieve business objectives.
• Information System
– Set of interrelated components that collect,
process, store and distribute information to
support decision making, coordination & control
of organizations.
– Also help in analyzing problems, visualize complex
subjects and create new products.
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Information Systems
Information Systems contain information about:
• People
• Places
• Things
18
Data, Information, and Systems
• Data vs. Information
– Data
• A “given” or fact: a number, a statement, or a picture
• The raw materials in the production of information
– Information
• Data that have meaning within a context
• Raw data or data that have been manipulated
19
Data Manipulation
• Raw data
– Time-consuming to read
– Difficult to understand
• Manipulated Data
– Provides useful information
20
Generating Information
• Raw data are
processed in an IS
to create final
useful information
– Process:
Manipulation of
data
– Computer-based
ISs: process data to
produce
information
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Information: Important Resource
• Information
must be
useful
–
–
–
–
–
Relevant
Complete
Accurate
Current
Cost effective
in business
22
The Four Stages of Data Processing
• Input: Data are collected and entered into
computer
• Data processing: Data are manipulated into
information using mathematical, statistical,
and other tools
• Output: Information is displayed or presented
• Storage: Data and information are maintained
for later use
23
Components of an Information System
24
Computer Equipment for Information
System
• Input devices: introduce data into the IS
• Processor: manipulates data through the IS
• Output devices: display information
• Storage devices: store data and information
25
Information systems are more than
computers
Dimensions of Information Systems
• Computer Literacy: Knowledge of information
technology
• Information Systems Literacy: Understanding:
– Organization
– Management
– Information Technology (technical)
27
Organisational Dimension of
information systems
– Hierarchy of authority, responsibility
•
•
•
•
•
•
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers
Levels in an organisation
Organisational Dimension of
information systems (2)
– Separation of business functions
•
•
•
•
Sales and marketing
Human resources
Finance and accounting
Production and manufacturing)
– Unique business processes
– Unique business culture
– Organizational politics
Management dimension of
information systems
– Managers set organizational strategy for
responding to business challenges
– In addition, managers must act creatively:
•
•
Creation of new products and services
Occasionally re-creating the organization
Technology dimension of information
systems
– Computer hardware and software
– Data management technology
– Networking and telecommunications technology
• Networks, the Internet, intranets and extranets, World Wide Web
– IT infrastructure: provides platform that system is built on
Business Perspective on IS
• Investment in information Technology & systems
must provide economic value to business
• Return on investment must be justified
• RoI must be better than other investments in
other tangible assets
• Increase productivity
• Increase revenues
• Strategic positioning
• High stocks value
33
Business Perspective on IS
•
•
•
•
•
Creating VALUE for the firm
Decrease costs
Improve decision making
Improve execution of business processes
Provide solution to a problem or a challenge
34
Business information value chain
• Raw data acquired and transformed through stages that
add value to that information
• Value of information system determined in part by extent
to which it leads to better decisions, greater efficiency, and
higher profits
Business information value chain
Variation in Returns on
Information Technology Investment
• Investing in information technology does not
guarantee good returns
• Considerable variation in the returns firms receive
from systems investments
• Factors:
– Adopting the right business model
– Investing in complementary assets (organizational and
management capital)
Complementary assets
• Assets required to derive value from a primary
investment
• Firms supporting technology investments with
investment in complementary assets receive
superior returns
• E.g.: invest in technology and the people to make
it work properly
Complementary assets include
– Organizational investments, e.g.
• Appropriate business model
• Efficient business processes
– Managerial investments, e.g.
• Incentives for management innovation
• Teamwork and collaborative work environments
– Social investments, e.g.
• The Internet and telecommunications infrastructure
• Technology standards