Thomson Learning © Chapter Eight Information Technology and Control

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

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

Thomson Learning © Major Perspectives of the Balanced Scorecard Mission Strategy Goals 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 Financial Do actions contribute to improving financial performance? Examples of measures: profits, return on investment Learning and Growth Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions Customers How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty 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,

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

Thomson Learning © 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 Knowledge Management Strategy 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 Technology Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, March-April 1999,

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

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