Using Advanced Information Technology to Increase Performance McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter eighteen

18-3 Learning Objectives Differentiate between data and information, and list the attributes of useful information Describe three reasons why managers must have access to information to perform their tasks and roles effectively. Describe the computer hardware and software innovations that have created the IT revolution.

18-4 Learning Objectives Differentiate among seven different kinds of management information systems. Explain why managers are using IT to build strategic alliances and network structures to increase efficiency and effectiveness

18-5 Information and the Manager’s Job Data –Raw, unsummarized, and unanalyzed facts. Information –Data that are organized in a meaningful fashion

18-6 Attributes of Useful Information

18-7 Factors Affecting the Usefulness of Information Figure 18.1

18-8 What is Information Technology? Information Technology – set of methods or techniques for acquiring, organizing, storing, manipulating, and transmitting information

18-9 What is Information Technology? Management Information System – specific form of IT that managers utilize to generate the specific, detailed information they need to perform their roles effectively

18-10 What is Information Technology? Managers need information for three reasons: 1.To make effective decisions 2.To control the activities of the organization 3.To coordinate the activities of the organization

18-11 Information and Decisions Most of management is about making decisions To make effective decisions, managers need information, both from inside and outside the organization

18-12 Information and Control Managers achieve control by: 1.Establishing measurable goals 2.Measuring actual performance 3.Comparing actual performance with goals 4.Taking any corrective action

18-13 Information and Coordination Coordination problems that managers face in managing global supply chains are increasing Managers have adopted sophisticated IT that helps them coordinate the flow of materials, semifinished goods, and finished goods throughout the world

18-14 The Effects of Advancing IT IT revolution began with the development of the first computers Modern computers can read, process, and store billions of instructions per second This power forms the foundation of the ongoing IT revolution

18-15 The Effects of Advancing IT Products resulting from advancing IT –Powerful microprocessors and PCs, high- bandwidth wireless smart phones, sophisticated word-processing software, expanding computer networks, inexpensive digital cameras, useful online information and retailing services

18-16 The Effects of Advancing IT IT helps create new product opportunities that managers and their organizations can take advantage of IT creates new and improved products that reduce or destroy demand for older, established products

18-17 IT and the Product Life Cycle Product Life Cycle –Refers to the way in which the demand for a product changes in a predictable way over time

18-18 A Product Life Cycle Figure 18.2

18-19 A Product Life Cycle Embryonic stage –Product has yet to gain widespread acceptance –Customers are unsure what a product has to offer Growth stage –Many consumers are buying the product for the first time –Demand increases rapidly

18-20 A Product Life Cycle Mature stage –Market peaks because most customers have already bought the product –Demand is typically replacement demand Decline stage –Advancing IT leads to the development of a more advanced product making the old one obsolete

18-21 A Product Life Cycle Advances in IT are one of the most important determinants of the length of a product’s life cycle The shorter the length of a product’s life cycle because of advancing IT the more important it is to innovate products quickly and continuously

18-22 Types of Management Information Systems Computer Networks –Networking The exchange of information through a group or network of interlinked computers Servers are powerful computers that relay information to client computers connected on a Local Area Network (LAN). Mainframes are large computers processing vast amounts of information. The Internet is a world wide network of computers.

18-23 Figure 18.3 A Typical Four-Tier Information System

18-24 Types of Management Information Systems Operating system software –software that tells computer hardware how to run Applications software –software designed for a specific task or use

18-25 Six Computer-Based Management Information Systems Figure 18.4

18-26 The Organizational Hierarchy Traditionally, managers have used the organizational hierarchy as the main system for gathering information necessary to make decisions and coordinate and control activities

18-27 The Organizational Hierarchy Drawbacks Can reduce timeliness of information Reduces quality of information Tall structure can make for an expensive information system

18-28 Types of Information Systems Transaction Processing Systems –Systems designed to handle large volumes of routine transactions. Were the first computer-based information systems handling billing, payroll, and supplier payments.

18-29 Types of Information Systems Operations Information Systems –Systems that gather, organize, and summarize comprehensive data in a form of value to managers. Can help managers with non-routine decisions such as customer service and productivity.

18-30 Types of Information Systems Decision Support Systems –Provides computer-built models that help managers make better nonprogrammed decisions. –New productive capacity, new product development, launch a new promotional campaign, enter a new market or expand internationally

18-31 Types of Information Systems Executive Support System –Sophisticated version of a decision support system designed to meet the needs of top managers Group Decision Support System –An executive support system that links top managers so that they can function as a team.

18-32 Expert Systems and Artificial Intelligence Artificial Intelligence –Behavior by a machine that, if performed by a human being, would be called “intelligent” –Already possible to write programs that can solve problems and perform simple tasks

18-33 Expert Systems and Artificial Intelligence Expert Systems –Most advanced management information systems available –System that employs human knowledge, embedded in computer software, to solve problems that ordinarily require human expertise

18-34 Enterprise Resource Planning Systems –multi-module application software packages that allow a company to link and coordinate the entire set of functional activities and operations necessary to move products from the initial product design stage to the final customer stage

18-35 Enterprise Resource Planning Systems 1.Help each individual function improve its functional-level skills 2.Improve integration among all functions so that they work together to build a competitive advantage for the company

18-36 Types of Information Systems E-Commerce Systems –Trade that takes place between companies, and between companies and individual customers, using IT and the Internet

18-37 Types of E-Commerce Figure 18.5

18-38 E-Commerce Systems Business-to-business (B2B) –trade that takes place between companies using IT and the Internet to link and coordinate the value chains of different companies

18-39 E-Commerce Systems B2B marketplace –Internet-based trading platform set up to connect buyers and sellers in an industry

18-40 Types of E-Commerce Business-to- customer (B2C) –trade that takes place between a company and individual customers using IT and the Internet

18-41 Strategic Alliances, B2B Network Structures, and IT Strategic Alliances –formal agreement that commits two or more companies to exchange or share their resources in order to produce and market a product

18-42 Strategic Alliances, B2B Network Structures, and IT B2B network structure –formal series of global strategic alliances that one or several organizations create with suppliers, manufacturers, and/or distributors to produce and market a product

18-43 How Computer-Based Information Systems Affect the Organizational Hierarchy Figure 18.6

18-44 The Impact and Limitations of Information Systems Horizontal Information Flows –Information networks can bridge functional departments which allows information to flow horizontally between departments, leading to much higher productivity, quality, and innovation.

18-45 Communication Flows at Tel Co. and Soft Co. Figure 18.7

18-46 Boundaryless Organization –composed of people linked by IT who rarely see one another face-to-face –functional experts who form an alliance with an organization

18-47 Boundaryless Organization Knowledge management system –company-specific virtual information system that systematizes the knowledge of its employees and facilitates the sharing and integrating of expertise within and between functions and divisions through real-time, interconnected IT

18-48 Limitations of Information Systems Loss of the Human Element –Information systems cannot present all kinds of information accurately. Thick information, which is rich in meaning and not quantifiable, is best suited to human analysis. Information systems should support face- to-face communication, and not be expected to replace it

18-49 Limitations of Information Systems Causes of Difficult Implementations –Information systems can be hard to develop and put into service. –Consistent standards for systems do not exist. Makers of hardware use different standards which makes it hard to share information between systems.

18-50 Limitations of Information Systems To avoid problems: –List major organization goals and the information types require measure those goals. –Audit the current system to verify that information collected is accurate, reliable, timely, and relevant. –Investigate other sources of information –Build support for the system with workers. –Create formal training programs. –Emphasize that face-to-face contact is important.