MIS Information Systems in Organizations Dave Salisbury ( ) (web site)

Copyright 2007 John Wiley & Sons, Inc. Information Systems: Creating Business Value John Wiley & Sons, Inc. Mark Huber, Craig Piercy, and Patrick McKeown

Copyright 2007 John Wiley & Sons, Inc. Chapter 4: Business Fundamentals and IT Strategy

Copyright 2007 John Wiley & Sons, Inc. What We Will Cover: Businesses as Open Systems How Businesses Organize to Create Value The Value Chain Applying IT to Create Business Value Strategically Fitting IT to the Organization: A Business Example

Copyright 2007 John Wiley & Sons, Inc. Student ROI (Return on Investment) Your investment of time and effort in this course will result in your being able to answer these questions: 1.Why can organizations be thought of and modeled as open systems? 2.How are organizations structured to optimize business value? 3.How do value chains related to business organizations? 4.In what ways can organizations apply IT to build business value? 5.How can businesses strategically fit IT to the organization?

Copyright 2007 John Wiley & Sons, Inc. Businesses as Open Systems How does a business operate as a system?

Copyright 2007 John Wiley & Sons, Inc. Stakeholders and Boundaries A stakeholder is a person or entity that has an ________ and an ________ on how a business will function in order to succeed. A stakeholder can be ________ or ________ relative to the business. All open systems have an ________ ________ which separates them from their environment but still allows them to interact with their environment.

Copyright 2007 John Wiley & Sons, Inc. Organizational Stakeholders What are some specific examples of the organizational stakeholders shown in the figure?

Copyright 2007 John Wiley & Sons, Inc. The Business Process How do we define a business process? Why are “business” processes important to all organizations? Two important outputs of business processes are ________ and ________.

Copyright 2007 John Wiley & Sons, Inc. Inputs to Open Systems Organizations Input TypeDescription Data, information, and knowledge Labor Raw Materials Capital Technology

Copyright 2007 John Wiley & Sons, Inc. Feedback Feedback is … How is feedback related to a business’ inputs, processes, and outputs? Why do businesses use feedback to monitor the efficiency and effectiveness of a given process? How and why is feedback related to a business’ business environment?

Copyright 2007 John Wiley & Sons, Inc. Organizing to Create Value All business organizations possess structures that organize ________, ________, and ________. Types of organizational structures include ________, ____________, and ________ structures. In ________ and ____________ structures lines of authority are vertically oriented. A ________ organization is a blend of functional and decentralized organizations that uses teams.

Copyright 2007 John Wiley & Sons, Inc. Organizational Structures

Copyright 2007 John Wiley & Sons, Inc. Advantages of Organizational Forms Organizational FormAdvantages Functional Decentralized Matrix

Copyright 2007 John Wiley & Sons, Inc. Disadvantages of Organizational Forms Organizational Form Disadvantages Functional Decentralized Matrix

Copyright 2007 John Wiley & Sons, Inc. The Value Chain The value chain is a __________ ________ of __________, each of which adds value or supports the addition of value to the firm’s goods and services 1. Every action an organization takes, from securing the necessary raw materials (input), to making the goods or service (process), to completing a transaction with a customer (output), is either a __________ activity or __________ activity. What is a transaction? 1 Porter, M. E., “How competitive forces shape strategy.” Harvard Business Review, 1979, pp

Copyright 2007 John Wiley & Sons, Inc. An Organizational Value Chain (adapted from Porter)

Copyright 2007 John Wiley & Sons, Inc. Primary Activities Primary activities are …. Example primary activities include inbound logistics (obtaining raw materials), operations (creating the product), outbound logistics (shipping the product), and marketing, sales, and service (selling the product). For businesses that you interact with, what are some examples of each of the primary activities?

Copyright 2007 John Wiley & Sons, Inc. How would you define each of the support activities shown above? Examples of support activities include… ?. Support Activities – are value chain activities that an organization conducts to support the creation of business value.

Copyright 2007 John Wiley & Sons, Inc. Value Chain Summary An organization’s value chain is the sum of its primary and support activities working together to create business value. The value chain is another way to view the organization as a system (inputs  processes  outputs). The value chain is also a useful tool for defining an organization’s core competencies and the activities it can pursue to gain a sustained competitive advantage.

Copyright 2007 John Wiley & Sons, Inc. IS and IT Support for the Value Chain Through the intelligent use of IS and IT, a business can increase its competitive advantage.

Copyright 2007 John Wiley & Sons, Inc. IS and IT Support for the Value Chain Some IS and IT are specific to particular parts of the value chain or departments. Other systems, known as __________ __________, support and are used by the entire enterprise through a centralized database and coordinated software modules. IT can support almost every activity in the organization as well as helping to transform and integrate differing aspects of the value chain.

Copyright 2007 John Wiley & Sons, Inc. Applying IT to Create Business Value Automating, informating, and transforming are three ways that IT can be applied to value chain activities to create business value? Automating is …. Informating is …. Transforming is ….

Copyright 2007 John Wiley & Sons, Inc. Using IT Automation to Create Business Value IndustryAutomationBenefits BankingATM machines, online banking Grocery/ Retail Barcode inventory systems TravelReservation and scheduling systems

Copyright 2007 John Wiley & Sons, Inc. Applying Automation When applying automation within an organization to a single process, management considers answers to questions such as: 1.What is the main goal, and what are the steps of the process? 2.What data and information are required to carry out the process? How does data flow between the steps? 3.How is the process affected by other processes? When should it occur? What starts it? How does the output effect other processes? Q: As CEO of a hypothetical organization, how would you automate a business process found in your organization?

Copyright 2007 John Wiley & Sons, Inc. Automating Cash Withdrawal Process

Copyright 2007 John Wiley & Sons, Inc. Informating to Do Things Better What is informating? How does informating help organizations? What is a major advantage of informating versus atuomating? Relative to informating, why is it important that an organization know what data is captured and stored as well as where the data is located?

Copyright 2007 John Wiley & Sons, Inc. Added Benefits of Informating IndustryIT ApplicationBenefits from Informating BankingATM machines, online banking Grocery/ Retail Barcode inventory systems TravelReservation and scheduling systems

Copyright 2007 John Wiley & Sons, Inc. Transforming to Gain Competitive Advantage Since one of the primary goals of a business’s strategy is achieve a sustainable competitive advantage, most businesses have a transforming view of IT. What are two ways to obtain a competitive advantage? What is a cost advantage? What is a differentiation advantage?

Copyright 2007 John Wiley & Sons, Inc. A Resource-Based View With a resource-based view, a company gains competitive advantage through the development of distinctive competencies. Q. - How does a company gain its distinctive competencies? What are some examples?

Copyright 2007 John Wiley & Sons, Inc. Using Distinctive Competencies and IT Distinctive competencies enable organizations to innovation, product quality, process efficiency, and customer responsiveness. IT can assist in all of these areas. Through automation with IT, a business can achieve a lower cost structure. Through informating with IT, a business can learn new ways to increase or transform its capabilities in order to differentiate its products.

Copyright 2007 John Wiley & Sons, Inc. Can Companies Gain a Unique Competitive Advantage with IT? A widely held view during the late 1990s and early 2000s was that companies can gain a unique competitive advantage with IT? Dr. Nicolas Carr argued that since the core functions of IT are available and affordable to all companies, it isn’t possible to gain competitive advantages with IT alone. If a company can automate a particular process, so can its competitors. Competitive advantage only comes from doing things other companies can’t do. A widely held view is that competitive advantage comes from the intelligent application of IT to support business strategies and to leverage distinctive competencies.

Copyright 2007 John Wiley & Sons, Inc. Strategically Fitting IT to the Organization Four views of a how a business can derive benefit by applying IT to the organization: When applying IT, organizations must consider: Q. - What can happen if organizational leaders do not ensure that IS and IT strategically fit an organization?

Copyright 2007 John Wiley & Sons, Inc. IT Application Newspaper Example ViewScopeBenefitsExample Support of value chain Organization-wideSystem view Focus on value-adding activities Fits IT to organization Use subscription data to forecast demand Use demographic data for target marketing and improved customer service AutomatingProcess/TransactionCost reduction, efficiency, quality, and consistency Online subscription reduces printing and handling costs InformatingProcess/TransactionKnowledge and learning of core competencies Use transaction data to understand subscription process and customers Transforming/ Competitive advantage Organization-wideConnects automating and informating of processes to strategy Develop a unique competency for delivering targeted content to customer segments