1. Managing the Digital Firm
Chapter 1
Managing the Digital Firm

2. Management Information Systems Chapter 1 Managing the Digital Firm
OBJECTIVES
Explain why information systems are so important today for business and management
Evaluate the role of information systems in today’s competitive business environment
Assess the impact of the Internet and Internet technology on business and government

3. Management Information Systems
Chapter 1 Managing the Digital Firm
OBJECTIVES (Continued)
Define an information system from both a technical and business perspective and distinguish between computer literacy and information systems literacy
Identify the major management challenges to building and using information systems

4. Management Information Systems Chapter 1 Managing the Digital Firm
DaimlerChrysler Case
Challenge: 104 plants, 37 countries, 14,000 suppliers
Solutions: Integrated Volume Planning System connects demand side of business with suppliers, reducing inventories.
Powerway helps 3,400 suppliers track parts and quality, reducing errors.
Demonstrates IT’s role in operational excellence, better quality products, and agility–time to market
Illustrates the emerging digital firm landscape where information can flow seamlessly among business partners to create a superior customer experience

5. Information Resources
Physical Resource
Human Resources
Financial Resources
Information Resources

6. Why Information Systems Matter
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Why Information Systems Matter
There are four reasons why IT makes a difference to the success of a business:
Capital management
Foundation of doing business
Productivity
Strategic opportunity and advantage

7. About $1.8 trillion is spent each year by American businesses.
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Capital Management:
IT is the largest single component of capital investment in the United States.
About $1.8 trillion is spent each year by American businesses.
Managers and business students need to know how to invest this capital wisely.
The success of your business in the future may well depend on how you make IT investment decisions.

8. Information Technology Capital Investment
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Information Technology Capital Investment
Figure 1-1
Source: Based on the data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Tables 5.2 and 5.8, 2004.

9. Foundation of doing business:
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Foundation of doing business:
Most businesses today could not operate without extensive use of information systems and technologies.
The local restaurant probably manages their lunch-time crowds using hand-held devices that allow the waiter or waitress to communicate menu orders directly to the kitchen.
The rental car company uses information technology to track not only customer orders but may also use global positioning systems that relay the exact position of every car wherever it is.

10. The Interdependence between Organizations and Information Systems
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Interdependence between Organizations and
Information Systems
Figure 1-2

11. Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Productivity:
IT is one of the most important tools managers have to increase productivity and efficiency of businesses.
According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last decade. For firms this means IT is a major factor in reducing costs.
It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For firms this means IT is a major source of labor and capital efficiency.

12. Strategic Opportunity and Advantage:
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Strategic Opportunity and Advantage:
Create competitive advantage: IT makes it possible to develop competitive advantages.
New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-order business model that other firms have not been able to imitate.

13. Strategic Opportunity and Advantage:
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Strategic Opportunity and Advantage:
Create new services: eBay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success.
Differentiate yourself from your competitors: Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.

14. Transformation of the Business Enterprise

15. Globalization
Many of the service or whole new markets that didn't exist just a few years ago. There was no position called "Webmaster" in That's because the Web didn't exist. But now, that particular job category is one of the fastest growing in the U.S. and overseas. The global economy Laudon & Laudon talk about is being made possible by technology, and that's why it's so important that you understand how to use information systems technology instead of just computer technology.

16. Rise of the Information Economy:
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Rise of the Information Economy:
knowledge and information are key ingredients in creating wealth.
knowledge- and information-intense products and services.
Knowledge as a central productive and strategic asset

17. The Growth of the Information Economy
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Growth of the Information Economy
Figure 1-3
Source: U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 2003, Table 615; and Historical Statistics of the United States, Colonial Times to 1970, Vol. 1, Series D, pp

18. Why? Emergence of the Digital Firm:
When a firm goes digital, it's not about just adding a computer system to the mix. Throwing a computer system at outdated business processes is exactly the wrong thing to do. A truly digital firm has several characteristics that distinguish it from most of the firms claiming to be digitized:

19. Significant business relationships are digitally enabled and mediated
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Characteristics:
Significant business relationships are digitally enabled and mediated
Core business processes are accomplished through digital networks and span the entire organization
Key corporate assets are managed digitally
Internal and external environments are quickly recognized and dealt with
And the number one reason digital firms experience greater opportunities for success and profits is because they view information technology as the "core of the business and the primary management tool."

20. The Emerging Digital Firm
Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Emerging Digital Firm
Figure 1-4

21. What Is an Information System?
Technology perspective:
A Business Perspective:

22. What Is an Information System?
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
What Is an Information System?
Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization

23. What is an Information System? (Continued)
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
What is an Information System? (Continued)
Data: Streams of raw facts representing events such as business transactions
Data is the input
Information: Clusters of facts meaningful and useful to human beings in the processes such as making decisions
Information is the output.

24. Data and Information Management Information Systems Figure 1-5
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
Data and Information
Figure 1-5

25. Functions of an Information System
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
Functions of an Information System
Figure 1-6

26. Computer-Based Information System (CBIS)
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
Computer-Based Information System (CBIS)
Rely on computer hardware and software
Processing and disseminating information
Fixed definitions of data and procedures
Collecting, storing, and using information

27. A Business Perspective on Information Systems
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
A Business Perspective on Information Systems
Information systems are more than just technology.
Businesses invest in IS in order to create value and increase profitability.
Information systems are an organizational and management solution to business challenges that arise from the business environment.

28. A Business Perspective on Information Systems (Continued)
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
A Business Perspective on Information Systems (Continued)
Based on information technology but also require significant investment in organizational and management changes and innovations
IS create value primarily by changing business processes and management decision making.

29. The Business Information Value Chain
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
The Business Information Value Chain
Figure 1-7

30. Information Systems Are More than Computers
Management Information Systems
Chapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
Information Systems Are More than Computers
Figure 1-8

31. Organizations
Organizations exist everywhere, and each has its own structure, just as workplace organizations have structures and personalities to fit their needs.
For Example, A baseball team.
Business organizations have their major business functions, which need many kinds of Human Resources with various talents, who are well-trained and well-informed, in order to succeed.

32. Organizations
The larger the organization, the more formal the management structure, including the need for standard operating procedures (SOPs). SOPs can help streamline standard business processes so that managers and employees can properly complete their tasks in a more efficient manner. Many companies now integrate these business processes into their information systems to ensure uniformity, consistency, and compliance.

33. Management
Take the example of professional baseball managers. They don't actually play the game; they don't hit the home run, catch the fly ball for the last out, or hang every decoration for the celebration party. They stay on the sidelines during the game. Their real role is to develop the game plan by analyzing their team's strengths and weaknesses. But that's not all; they also determine the competition's strengths and weaknesses. Every good manager has a game plan before the team even comes out of the locker room. That plan may change as the game progresses, but managers pretty much know what they're going to do if they are losing or if they are winning.

34. Technology Hardware. Software Storage technology
Communications technology
Network
Internet.
Extranets,
Intranets
Information technology (IT) infrastructure.

35. The Challenge of Information Systems: Key Management Issues
The Information Systems Investment Challenge
The Strategic Business Challenge
The Globalization Challenge
The Information Technology Infrastructure Challenge
The Responsibility and Control Challenge