Information Technology and Control Chapter Eight Information Technology and Control Thomson Learning © 2004

Evolution of Organizational Applications of Information Technology 3. Strategic Weapon TOP (strategy, plans, non-programmed) INTERNAL EXTERNAL Knowledge Management Intranets Enterprise resource planning Extranets E-Commerce Integrated Enterprise 2. Business Resource Management Information systems Decision Support Systems Executive information · Management control systems · Balanced Scorecard MANAGEMENT LEVEL Direction of Information System Evolution 1. Operations Transaction processing systems Data warehousing FIRST-LINE (operational, past, programmed) LOW SYSTEM COMPLEXITY HIGH Thomson Learning © 2004

A Simplified Feedback Control Model Set Strategic Goals Establish Standards of Performance Take Corrective Action as Needed Measure Actual Performance and Compare to Standards Thomson Learning © 2004

Major Perspectives of the Balanced Scorecard Financial Do actions contribute to improving financial performance? Examples of measures: profits, return on investment Customers How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty Internal Business Processes Does the chain of internal activities and processes add value for customers and shareholders? Examples of measures: order-rate fulfillment, cost-per-order Mission Strategy Goals Learning and Growth Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions Sources: Based on Robert S. Kaplan and David P. Norton, “Using The Balanced Scorecard as a Strategic Management System,” Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, No. 2 (August 1997), 21-27; and Cathy Lazere, “All Together Now,” CFO, February 1998, 28-36. Thomson Learning © 2004

Example of ERP Network Central Database Sales Financial and Accounting Purchasing Human Resources Inventory and Manufacturing Distribution Thomson Learning © 2004

Two Approaches to Knowledge Management Explicit Provide high-quality, reliable, and fast information systems for access of codified, reusable knowledge Tacit Channel individual expertise to provide creative advice on strategic problems People-to-documents Develop an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge Invest heavily in information technology, with a goal of connecting people with Reusable, codified knowledge Person-to-person Develop networks for linking people so that tacit knowledge can be shared Invest moderately in information technology, with a goal of facilitating conversations and the ex- change of tacit knowledge Knowledge Management Strategy Technology Thomson Learning © 2004 Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, March-April 1999, 106-116.

Electronic Data Interchange for International Transactions Manufacturer’s Bank’ Customer’s Bank Suppliers MANUFACTURER Customer Export Freight Forwarder Import Clearing Agent Export Customs Import Customs Thomson Learning © 2004

Key Characteristics of Traditional vs Key Characteristics of Traditional vs. Emerging Interorganizational Relationships Traditional Interorganizational Relationships Emerging Interorganizational Relationships Arm’s-length relationship Use of telephone, mail, some EDI for ordering, invoicing, payments Interactive, electronic relationship Electronic ordering, invoicing, payments Suppliers Limited communication with manufacturer Mix of phone response, mail hard copy information Direct access to manufacturer, real-time information exchange Electronic access to product information, consumer ratings, customer service data Customers Thomson Learning © 2004 Source: Based on Charles V. Callahan and Bruce A. Pasternack, “Corporate Strategy in the Digital Age,” Strategy & Business, Issue 15, Second Quarter 1999, 10-14.