Purposes of Information Systems Chapter 2

Learning Objectives  Know the principles of competitive advantage.  Know the characteristics of decision making and problem solving.  Recognize that different information systems are needed to solve different problem definitions.  Understand how information systems facilitate problem solving.  Understand how information systems create competitive advantage.

Why Firms Seek Competitive Advantage ( Porter’s Five-Force Model): Rivalry among existing competitors Threat of new entrants Threat of substitute product and services Bargaining power of buyers Bargaining power of suppliers

Information Systems for Competitive Advantage  Businesses continually seek to establish competitive advantage in the marketplace.  There are eight principles: –The first three principles concern products. –The second three principles concern the creation of barriers. –The last two principles concern establishing alliances and reducing costs.

Organizational Change  Organizational change deals with how organizations plan for, implement and handle change. Overcoming resistance to change can be the hardest part of bringing information systems into a business. Too many computer systems and new technologies have failed because managers and employees were not prepared for change.  A change model identifies the phases of change and the best way to implement it: –Unfreezing is the process of removing old habits and creating a climate receptive to change –Moving is the process of learning new work methods, behaviors and systems –Refreezing involves reinforcing changes to make the new process second nature, accepted and part of the job

Information Systems for Problem Solving  Information systems can be used to solve problems.  Problem definition –A problem is a perceived difference between what is and what is not. –A problem is a perception. –A good problem definition defines the differences between what is and what ought to be by describing both the current and desired situations. –Different problem definitions require the development of different information systems. –All personnel in the organization must have a clear understanding of which definition of the problem the information system will address.

Decision Making and Problem Solving  Problem solving is the most critical activity a business organization undertakes. Problem solving begins with decision making.  In the intelligence stage, potential problems and /or opportunities are identified and defined  In the design stage, alternative solutions to the problem are developed  In the choice stage, a course of action is selected  In the implementation stage, action is taken to put the solution into effect  In the monitoring stage, the implementation of the solution is evaluated to determine if the anticipated results were achieved and modify the process

The Decision Process  Two decision processes (method by which a decision is to be made) are structured and unstructured.  Structured decision process is one for which there is an understood and accepted method for making the decision.  Unstructured process is one for which there is no agreed on decision making process.  The terms structured and unstructured refers to the decision process-not the underlying subject.

Relationship of Decision Level and Decision Type

Optimization, Satisficing, and Heuristic  Optimizing is finding the best solution and is usually best fit for problems that can be modeled mathematically with a low degree of estimation risk. For example, find how many products an organization should produce to meet a profit goal.  Satisficing is finding a good, but not necessarily the best, solution. Satisficing does not look at all possible solutions, but at those that are likely to give good results. Satisficing is a good decision method because it is sometimes too expensive to analyze every alternative to get the best solution. A satisficing example is when you have to select a location for a new plant.  Heuristics are guidelines or procedures that usually find a good solution by using “rules of thumb”.

Different Types of Information Systems for Different Types of Decisions  Automated information systems are those by which the computer hardware and program components do most of the work. –Humans start the programs and use the results.  Augmentation information systems are those in which humans do the bulk of the work. –These systems augment, support, or supplement the work done by People ( , instant messaging, video-conferencing, etc) to aid in decision making.

How Decision Level, Decision Type and IS Type Are Related

Information Systems for Decision Making  Decision making in organizations is varied and complex.  Decisions occur at three levels in organizations (decision levels):  Operational decisions concern day-to-day activities. –Information systems that support operational decision making are called transaction processing systems (TPS).  Managerial decisions concern the allocation and utilization of resources. –Information systems that support managerial decision making are called management information systems (MIS).  Strategic decision making concern broader-scope organizational issues. –Information systems that support strategic decision making are called executive information systems (EIS).

Knowledge Management System  A knowledge management system (KMS) is an information system for storing and retrieving organizational knowledge. This knowledge can be in the form of data, documents, or employee know-how.  KMS goal is to make the organization knowledge available to –Employees –Vendors –Customers –Investors –Press and who else who needs the knowledge

Summary  Organizations develop and use information systems to gain competitive advantage, to solve problems, and to assist in decision making  Eight principles of competitive advantage.  A problem is a perceived difference between what is and what ought to be.  Decisions vary according to whether a structured or unstructured process is used to make them.  Automated information systems are those in which the computer and program side of the five components do most of the work.  Augmentation information systems are those in which humans do most of the work.  Another way to consider information systems and decision making is to consider the steps of the decision process.  Different types of information systems are used for different steps of the decision process.  Decisions can be made at the operational (TPS), managerial (MIS), and strategic (EIS) levels.

Video  Interview Question: According to your survey, you like sociable environments, but will follow-through on tasks that are important. How do you prioritize and keep on track toward your objectives? How do you manage procrastination and talkative co-workers?  How to evaluate the responses to this question? PeopleKeys® will compare the applicants response to a benchmark set by the actual job description - then once the interview process is complete - PeopleKeys® will tell you which applicant(s) are best suited for the position.  PeopleKeys is a tool for understanding the strengths and weaknesses of individuals based on personality traits that can be used for hiring, training, retention, and much more.

Guides  Ethics Guide: –Do you see evidence of a digital divide in your campus, hometown, neighborhood? What solutions do you offer to reduce the digital divide?  Problem Solving Guide: –What is the difference between egocentric and empathetic thinking? –How does empathetic thinking relate to problem definition? –In business, is empathetic thinking smart?  Reflections Guide: –Summarize the efforts you have taken to build an employment record that will lead to job offers after graduation. –Describe one way in which you have a competitive advantage over your classmates. –How can you use student alliances to obtain a job?