Chapter Using Information Technology to Increase Performance

18-2 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Overview Why you need information to perform effectively How data differs from information What are the effects of the IT revolution? Increased productivity? Changed structures? Intrusion? How can you use IT to create competitive advantage?

18-3 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Genie is Out of the Bottle Scientia est potestas “KNOWLEDGE IS POWER”

18-4 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Information and the Manager’s Job Data: Raw, unsummarized, unanalyzed facts -- CHAOS Information: Data organized in a meaningful fashion so that it is actionable – ORDER and CONTROL

18-5 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Attributes of Actional Information Accurate Reliable Timely Complete Relevant

18-6 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin What is Information Technology? Information Technology (IT) Hardware, software and techniques for: (1) acquiring (2) organizing (3) analyzing (4) sharing (5) storing Information

18-7 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Information and Decisions Management involves decision-making To make effective decisions, managers need information from inside and also outside the organization

18-8 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Information and Control Managers control by: (1)establishing measurable goals (2)measuring actual performance (3)comparing performance with goals (4)closing the gap with corrective action This is PDCA and it requires actionable information

18-9 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Information and Coordination Global sourcing makes the coordination of supply chains increasingly complex Managers use sophisticated IT to help track and coordinate the flow of raw materials, semi-finished, and finished goods throughout the world Not possible before computers

18-10 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Effects of Advancing IT IT helps create new product opportunities that managers can take advantage of. IT creates new and improved products that reduce or destroy demand for older, established products. IT can drastically shorten product development time. IT can facilitate information-sharing that reduces costs and enhances efficiency and innovation.

18-11 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Product Life Cycle Embryonic Stage Product has yet to gain much acceptance. Customers uncertain of product’s benefits. Growth Stage Many consumers buy for the first time. Demand rapidly increases.

18-12 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Product Life Cycle Mature Stage Market peaks because most consumers have one. Typically replacement demand begins. Decline Stage Advancing IT leads to the development of a more advanced product that may render the previous one obsolete.

18-13 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Product Life Cycle IT advances are speeding up product development Staying slightly ahead on the product curve is becoming increasingly important Optimizing the use of resources can help create more new products than competitors (your money goes further)

18-14 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin IT is Intrusive 75% say technology has improved their ability to share ideas 58% say it has made their jobs more flexible 49% say it makes their job more stressful 70% of Blackberry owners check on weekends; 55% on vacation; 48% say they are required to answer s 24/7 Source: Pew Internet and American Life project (2009)

18-15 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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. Drawbacks: Can reduce timeliness and quality of information; can make the IT system very expensive (example: cutting corners)

18-16 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Cloud Networks Connected and often dispersed computer systems that provide calculating/analyzing power you can rent by the hour instead of installing your own system > Advantage: reduces cost > Disadvantage: diminishes control and security Many decisions require you to balance control and cost

18-17 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Strategic Alliances and Network Structures Strategic Alliance formal agreement that commits two or more companies to exchange or share resources in order to produce and market a product (NUMMI) 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 (Wagoner)

18-18 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Impact and Limitations of Information Systems Computer-based Information Systems:  Decentralize managerial decision-making  Flatten (“delayer”) organizations > Information systems reduce the need for excessive hierarchy to control the firm. > Managers control and coordinate using the system and the company culture > IT is like a virus introduced into a body that then changes the body’s shape and nervous system

18-19 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Impact and Limitations of Information Systems Horizontal Information Flows  Information networks can bridge functional silos allowing information to flow horizontally between them and leading to higher productivity, quality, collaboration and customer satisfaction  But this “electronic empowerment” – letting the genie out of the bottle -- requires managers to find new ways or strengthen old ways to lead and control (corporate culture, KPIs, performance reviews, lots of walk-around, etc.)

18-20 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Information Systems and Competitive Advantage Competitive Advantages of Information Systems  Improve managerial decision-making capability  Reduce need for hierarchical control systems  Increase efficiency and productivity, requiring fewer employees  Increase information reach and decision speed  Customize goods and services for each customer, building differentiation and competitive advantage

18-21 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Limitations of Information Systems Loss of the Human Element Information systems cannot present all kinds of information accurately Computers are fast and persistent but not intuitive; best computer still between your ears Information rich in meaning and ambiguity best suited to human analysis Information systems should complement – not replace -- face-to-face communication

18-22 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 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  Hardware makers use different standards, making it hard to share information between systems; legacy systems versus new applications (Tower of Babel)

18-23 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Implementing a new IT system List major goals and the types of information required to measure progress toward them; benchmark other companies and then: Audit your current system to verify that collected information is accurate, reliable, timely, complete and relevant Identify, investigate and implement additional information resources Make sure the new or enhanced IT system fits the need – build a business case to justify it Build employee buy-in and support Create and implement training Emphasize the continuing importance of face-to-face contact

18-24 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Summary IT is Powerful It can change a company’s structure, culture and neural network; be certain to strengthen the corporate culture and closely monitor performance to deal with the profound and far-reaching effects of electronic empowerment and distributed leadership

18-25 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Summary IT is Expensive Do the analysis necessary to determine that the investment will deliver sufficient pay-back by reducing costs, improving profits or building competitive advantage.

18-26 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Summary IT can create chaos Will the new system be able to talk to the existing legacy systems? Do they have the same standards? Can they pierce each others’ firewalls? Or will you instead create a tower of Babel that hinders rather than enhances communication and productivity?

18-27 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Team Presentation Schedule Thursday, 11/17 Team # 4 Team # 1 Tuesday, 11/22 Team # 2 Team # 5 Team # 3