Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-1

Chapter 14
Knowledge-based Information Systems

Teaching Objectives
Students should be able to answer the following questions:

1. Why do businesses today need knowledge management programs and systems for
knowledge management?
2. Which information systems applications are most useful for distributing, creating, and
sharing knowledge in the firm?
3. What are the business benefits of using artificial intelligence technology for knowledge
management?
4. How can businesses use expert systems and case-based reasoning to capture knowledge?
5. How can organizations benefit from using neural networks and other intelligent techniques?

Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The page
number for each key term is provided.

AI shell, 478 Knowledge assets, 464

Artificial intelligence, 476 Knowledge base, 478
Backward chaining, 479 Knowledge engineer, 479
Best practices, 465 Knowledge management, 464
Case-based reasoning (CBR), 481 Knowledge map, 473
Chief knowledge officer (CKO), 464 Knowledge repository, 468
Community of practice, 472 Knowledge workers, 466
Computer-aided design (CAD), 470 Knowledge work systems (KWS), 468
Data workers, 466 Neural network, 483
Enterprise information portal, 474 Office systems, 466
Expert system, 477 Organizational learning, 464
Forward chaining, 479 Organizational memory, 465
Fuzzy logic, 484 Rule base, 478
Genetic algorithms, 486 Rule-based expert system, 478
Hybrid AI systems, 487 Tacit knowledge, 465
Inference engine, 478 Teamware, 472
Information work, 466 Virtual Reality Modeling Language (VRML), 471
Intelligent agent, 487 Virtual reality systems, 470
Investment workstation, 471

Teaching Suggestions
Section One, “Knowledge Management in the Organization,” introduces students to
organizational learning and knowledge management as well as systems infrastructure for
knowledge management. You should spend a few minutes discussing knowledge assets and
knowledge management. The opening vignette provides a great example of how Hill Knowlton

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-2

Canada manages its knowledge assets. Ask your students to discuss how companies like
Microsoft, Dell, Air Canada, or Chapters might manage their knowledge assets.

Section Two, “Information and Knowledge Work Systems,” introduces students to the concept of
information work, how knowledge is created, shared, and distributed; knowledge work system
requirements, and examples of knowledge work systems. As an example, you can use an
insurance company to help demonstrate the concepts presented in this section. The Window on
Management is also a good way to help reinforce the concepts presented in this section.

Because of the increasing use of IT to redesign systems and organizations, you should stress to
your students that knowledge management is critical. Nonetheless, knowledge management
has its limitations, particularly in the area of artificial intelligence. The sharing of knowledge and
the development of knowledge are critical to most organizations, and students must understand
this. Students should also understand the roles of the office, office information, and the creation
of knowledge. For this course, it also means understanding the kinds of software that support
these roles. For example, provide your students with examples of group collaboration and the
software that supports it. Ask your students to identify uses for these software systems that are
not described in the text, so they can learn how to apply this chapter's information. If you have
time, encourage your students to research specific examples of knowledge work systems. Your
students can use Figure 14-2 as a guide.

Section Three, “Artificial Intelligence,” introduces students to artificial intelligence, expert

systems, and cased-based reasoning. Remind your students of the history of our discipline. In
the early 1980s, expert systems were believed to represent the future of artificial intelligence
and computers. To date, however, they have not lived up to expectations. Many expert systems
help human experts in such fields as medicine and engineering, but they are often very
expensive to produce and helpful only in special situations. Students must understand their
limitations and strengths. Ask your students to locate an expert system and evaluate its
strengths and limitations. Expert system demonstrations and reviews are easily located on the
Web. If you have time, ask your students to present their findings to the class.

Section Four introduces students to other intelligent techniques, including neural networks,
fuzzy logic, and genetic algorithms. One area of AI is neural networks, which are being used in
a number of disciplines such as voice recognition and natural-language processing.

You should mention to your students that AI is applied in many programs with which they are
familiar. For example, the intelligent help systems of many application packages are a feature
that students should know. The wizards, as the text shows, are examples of intelligent agents.
Sometimes the level of intelligence of these agents does not need to be high, such as the
agents or robots that look for specific pieces of information on the Internet.

“Window On” Boxes

Window on Management: Managing Construction Projects with the Internet

What are the management benefits of using Web-based construction management

software? How do such tools provide value? What are the possible drawbacks?

Better coordination, improved document management, online storage of documents, online

collaboration among project team members, online document exchange, ability to track

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-3

scheduling and performance, cost and error reduction, speed up construction, better overall
management, instant communication and revision of documents, elimination of manually
redrawing plans, reduced messaging, printing, and photo processing costs, and the ability to
electronically monitor progress are management benefits.

By permitting the easy sharing and flow of information, these tools save time, errors, and costs
in communicating and designing systems and decision making between locations. Possible
drawbacks include security issues, learning curves associated with the software, and resistance
to change.

Window on Organizations: A Knowledge Portal Becomes Deacons' Competitive

Weapon

How did Deacons obtain value from using a knowledge portal?

The knowledge portal gives Deacons' attorneys a single point of access to the firm's multitude of
documents. Deacons' clients can also use the portal to access their case files, provide
additional instructions for their cases, and check the status of their cases online. The portal
enables the company to be more competitive, enables its employees to easily locate and
access more information about a given subject, facilitates the sharing of work with colleagues,
makes best practice information available, helps reduce rework, makes available human
resources information, organizational charts, and floor plans, enables the training of new
lawyers more quickly, and provides a personalized Web interface.

How did this system change the way the company conducted business?

The most apparent change is the open, collaborative environment that now exists. Attorneys are
encouraged to share their work, instead of keeping it proprietary. Current and past case
information is now available online and easily accessible to all Deacons' attorneys as well as to
their clients.

What management, organization, and technology issues had to be addressed to use this
portal successfully?

Management needed to identify the firm's knowledge assets and determine how these assets
were to be made available. Additionally, management needed to encourage the attorneys,
especially the more experienced attorneys, to cooperate and share their work with others. Part
of the management process involved determining which documents to index and also how these
documents should be indexed and classified. The organizational issues involved changes in
culture, politics, standard operating procedures, and business processes. Management and
organizational issues also addressed to whom and how access to the online documents would
be granted. Technology issues addressed evaluating the costs, benefits, and capabilities of the
selected technology, indexing millions of documents, and training. Since portal technology that
met the firm's needs was not available in 1999, the firm hired Microsoft and Oracle to develop
the software and purchased Sun and Compaq hardware.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-4

For Discussion Questions

1. Knowledge management is a business process, not a technology. Discuss.

While knowledge management is a set of business processes used to create, store,

transfer, and apply knowledge, it also dramatically benefits from the use of information
technology to support business processes. Information technology helps a company
create, share, capture, codify, and distribute its knowledge. The chapter provides many
examples of how technology supports knowledge management. For instance, you can
refer students to the Window on Management and Window on Organizations.

2. How much can the use of artificial intelligence change the management process?

AI does several things that change management. For example, while expert systems
seldom eliminate human involvement, they can take over part of the human work, greatly
reducing the work of employees and enabling management to assign them to other work.
Case-based reasoning systems can do the same, as Compaq has shown with software
that enables customers to better solve their own problems, allowing management to
assign technicians to more productive work. Similarly, neural networks enable experts to
evaluate more pap smears with greater accuracy than they could before; this frees up
high-priced expertise to do more productive work.

Review Questions
1. What is knowledge management? List and briefly describe the information systems
that support it and the kind of information technology (IT) infrastructure it requires.

Knowledge management is the set of processes developed in an organization to create,

gather, store, maintain, and disseminate the firm's knowledge. The major information
systems that support knowledge management are office systems, knowledge work
systems, group collaboration systems, and artificial intelligence systems. Office systems
are systems designed to increase the productivity of information workers in the office.
Examples of office systems include word processing, desktop publishing, imaging and
Web publishing, electronic calendars, and desktop database.

Knowledge work systems are information systems that aid knowledge workers in the
creation and integration of new knowledge in the organization. Examples of knowledge
work systems include CAD, virtual reality, and investment workstations. Group
collaboration systems facilitate communication, collaboration, and coordination. Examples
of group collaboration systems include groupware, teamware, and intranets. Artificial
intelligence is the development of systems that behave as humans. Examples of artificial
intelligence systems include expert systems, neural nets, fuzzy logic, genetic algorithms,
and intelligent agents. Natural language, robotics, perceptive systems, expert systems,
and intelligent machines are artificial intelligence initiatives.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-5

2. How does knowledge management promote organizational learning? How do

knowledge management systems support knowledge networks, knowledge
repositories, and communities of practice?

Knowledge management promotes organizational learning as it defines and codifies the

organization’s knowledge base. Knowledge management enables the organization to learn
from its environment and incorporate this new knowledge into its business processes. New
SOPs can be created that reflect recent experiences within the organization. Knowledge
management systems enable the creation and support of knowledge networks, knowledge
repositories, and communities of practice. Knowledge networks enable people to be
linked, so that experts in a given area can be easily identified and share tacit knowledge.
Knowledge management streamlines the workflow and provides tools for creating a
knowledge repository. A knowledge repository is a collection of internal and external
knowledge stored in a single location for more efficient management and utilization by the
organization. A community of practice is an informal group of people who may live or work
in many different locations but who share a common professional interest.

3. Describe the roles of the office in organizations. What are the major activities that
take place in offices?

Offices are where data reside and where most knowledge work takes place. Offices
coordinate the flow of information throughout the entire organization. Offices coordinate
the work of local professionals and information workers, coordinate work in the
organization across levels and functions, and couple the organization to the external
environment. The major activities of an office are managing documents, scheduling for
individuals and groups, communicating with individuals and groups, and managing data
about individuals and groups.

4. What are the principal types of information systems that support information worker
activities in the office?

Group collaboration systems, office systems, artificial intelligence systems, and knowledge
work systems are types of information systems that support information worker activities in
the office. For this question, students should also mention that a variety of office systems
are available to support office activity. Table 14-1 identifies several types of office
systems.

5. What are the generic requirements of knowledge work systems? Why?

Knowledge work systems provide knowledge workers with the specialized tools they need.
They must have adequate computing power to handle the specialized tasks and complex
calculations, provide easy access to external databases to support research, and present
a user-friendly interface.

These systems reflect the special needs of knowledge workers. In this day and age,
knowledge work is critical to most organizations, and in some organizations knowledge
work systems produce strategic advantage or the knowledge that enables their company
to keep up with others who are trying for strategic advantages.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-6

6. Describe how the following systems support knowledge work: computer-aided

design (CAD), virtual reality, and investment workstations.

CAD systems automate the creation and revision of designs using computers and
sophisticated graphics software. By using CAD, a business benefits in many ways,
including the production of more sophisticated and functional designs, reducing the time
required to produce designs, reducing expensive engineering changes, preparing fewer
prototypes, and facilitating the tooling and manufacturing process.

Virtual reality systems have visualization, rendering, and simulation capabilities. Virtual
reality systems use interactive graphics software to create computer-generated
simulations that are so close to reality that users believe they are participating in a "real"
world. The users actually feel immersed in the computer-generated world. Virtual reality is
providing educational, scientific, and business benefits.

Investment workstations are computer systems that access and manipulate massive
amounts of financial data to manage financial trades and portfolio management. In
addition to massive amounts of data, financial data are produced so quickly that
specialized, very powerful systems are necessary to keep up with the rapid speed of
finance and financial changes today.

7. How does groupware support information work? Describe its capabilities and
Internet and intranet capabilities for collaborative work.

Groupware supports the electronic communication, collaboration, and coordination of

group work. Groupware enables group members to electronically schedule meetings, hold
meetings, communicate, collaborate, share document preparation, and share knowledge
and work information. Internet tools are available to support e-mail, newsgroup
discussions, group scheduling, Web publishing, and point-to-point conferencing. Web
conferencing tools are available to facilitate online meetings, conferences, and
presentations. Groups can use teamware to support group communication, collaboration,
and coordination via an intranet. Teamware is similar to groupware but does not provide
as powerful application development capabilities. Additionally, intranets provide the
foundation for enterprise knowledge environments; these knowledge environments can
then serve as knowledge maps. To facilitate the navigation of its knowledge resources, a
company can use an enterprise information portal.

8. What is artificial intelligence? Why is it of interest to business?

Artificial intelligence is commonly defined as the effort to develop computer-based systems

(hardware and software) that behave as humans. These systems would be able to learn
natural languages, accomplish coordinated physical tasks (robotics), and develop and
utilize a perceptual apparatus that informs their physical behaviour and language (visual
and oral perception systems), and emulate human expertise and decision making (expert
systems). These systems would also exhibit logic, reasoning, intuition, and common
sense. Artificial intelligence can help businesses store information in an active form as
organizational memory, create a mechanism that is not subject to human feelings,
eliminate routine and unsatisfying jobs held by people, and enhance the organization's
knowledge base by generating solutions to specific, massive, complex problems.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-7

9. What is the difference between artificial intelligence and natural or human

intelligence?

Artificial intelligence is an effort to fashion computer systems that behave like human
beings. AI systems would have the ability to learn natural languages, accomplish
coordinated physical tasks, utilize complex visual and oral perceptual systems, and use
complex logic, reasoning, and intuition. To date, the AI systems that have been developed
do not exhibit all of the qualities of human intelligence, and in no way can be considered
very intelligent. AI systems are based on human expertise, but they can use only very
limited reasoning patterns and perform very limited tasks. AI systems also cannot learn on
their own and must be programmed by a human to follow certain rules or produce certain
solutions. Nonetheless, useful, even valuable AI systems have been developed. Human
intelligence is definitely complex and broader than computer intelligence. Human beings
can develop associations, use metaphors and analogies, and impose a conceptual
apparatus on the surrounding world all on their own.

10. Define an expert system and describe how it can help organizations use their
knowledge assets.

An expert system is a knowledge-intensive computer program that captures the expertise

of a human in limited domains of knowledge. Expert systems can capture the knowledge
of skilled workers and in the form of a set of rules, adding to an organization's knowledge.
An expert system assists in decision making, can explain the reasoning behind a
recommended answer, and makes an expert's knowledge more readily available to more
employees within the organization.

11. Define and describe the role of the following in expert systems: rule base, AI shell,
and inference engine.

A rule base is the collection of knowledge in an AI system that is represented in the form
of IF-THEN rules. An inference engine will either search the rule base to arrive at a
conclusion or will start with a hypothesis and work backwards. An AI shell is a user-friendly
programming environment that is used to develop expert systems. AI shells can quickly
generate user-interface screens, capture the knowledge base, and manage the strategies
for searching the rule base. The inference engine is the software that embodies the
strategy used to search through the rule base; the inference engine can be forward or
backward chaining.

12. What is case-based reasoning? How does it differ from an expert system?

Case-based reasoning (CBR) uses descriptions of past experiences of human specialists,

representing them as “cases” and storing them in a database for later retrieval when the
user encounters a new case with similar parameters. The system searches for stored
cases similar to the new one, locates the closest fit, and offers the solution to the old case
for use with the new case. If the new case fits the solution, it is added to the case
database. If not, the case will be added with a new solution or explanations as to why the
solution did not work. CBR differs from expert systems in that it captures the knowledge of
the organization rather than a single expert, and the knowledge is captured as cases
rather than if-then rules. Also, expert systems work by applying IF-THEN-ELSE rules
against a knowledge base whereas CBR represents knowledge as a series of cases. With
case-based reasoning, the knowledge base is continuously updated by users.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-8

13. Describe three problems of expert systems.

Expert systems are limited to certain problems, working successfully only with problems of
classification that have few alternative outcomes. In addition, the outcomes must be
known in advance. Since some expert systems are complex, their maintenance costs can
equal their development costs in a few years. The knowledge base is fragile and brittle
because these systems rely upon IF-THEN representation. Such representation exists
primarily in textbooks and cannot be used for deep causal models or temporal trends.
Expert systems cannot represent knowledge that is essentially intuitive. Expert systems
have no ability to learn over time. Therefore, keeping the expert systems up-to-date in
fast-moving fields such as medicine and computer sciences is a critical problem.

14. Describe a neural network. For what kinds of tasks would a neural networkbe
appropriate?

Neural networks are usually physical devices (although they can be simulated with
software) that emulate the physiology of animal brains. The resistors in the circuits are
variable and can be used to "teach" the network. When the network makes a mistake, i.e.,
chooses the wrong pathway through the network and arrives at a false conclusion,
resistance can be raised on some circuits, forcing other neurons to fire. Used after a false
conclusion, intervention teaches the machine the correct response. If this learning process
continues for thousands of cycles, the machine "learns" the correct response. The simple
neurons or switches are highly interconnected and operate in parallel so they can all work
simultaneously on parts of a problem. Neural networks are very different from expert
systems where human expertise has to be modelled with rules and frames. In neural
networks, the physical machine emulates a human brain and can be taught from
experience.

An expert system is highly specific to a given problem and cannot be retrained. Neural
networks do not model human intelligence or aim to solve specific problems. Instead of
putting human expertise into programs, neural network designers put intelligence into the
hardware in the form of a generalized capacity to learn. Neural networks can solve entire
classes of problems. The neural network can be easily modified. Neural networks,
therefore, promise a substantial savings in development cost and time. They allow much
greater generality and more closely approximate what we consider intelligence. They have
proven especially useful for visual pattern recognition problems. The students should be
able to relate to Papnet and the system used by VISA.

15. Define and describe fuzzy logic. For what kinds of applications is it suited?

Fuzzy logic is a rule-based AI technology that tolerates imprecision, even using that
imprecision to solve problems we could not solve before. Fuzzy logic creates rules that
use approximate or subjective values and incomplete or ambiguous data. Fuzzy logic
represents more closely the way people actually think than traditional IF-THEN rules. For
example, if we all agree that 120 degrees is hot and -40 degrees is cold, then is 75
degrees hot, warm, comfortable, or cool? The answer is fuzzy at best and cannot be
programmed in an IF-THEN manner. Also, discuss with the students the fuzzy logic
system used by Sendai to control acceleration so it will operate more smoothly and save
the subway company expenses.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-9

16. What are genetic algorithms? How can they help organizations solve problems? For
what kinds of problems are they suited?

Genetic algorithms (adaptive computation) are a variety of problem-solving methods that

are conceptually based on the method that living organisms use to adapt to their
environment – the process of evolution. Genetic algorithms control the generation,
variation, adaptation, and selection of possible problem solutions using genetically based
processes. As solutions alter and combine, the worst ones are discarded, and the better
ones survive to go on and produce even better solutions.

Genetic algorithms are particularly suited to the areas of optimization, product design, and
the monitoring of industrial systems. Organizations can use genetic algorithms to minimize
costs and maximize profits and schedule and use resources efficiently. Genetic algorithms
are ideal when problems are dynamic and complex and involve hundreds of variables or
formulas. For example, General Electric used a genetic algorithm to help them design a jet
turbine aircraft engine that required the use of about 100 variables and 50 constraint
equations. The text provides other examples.

17. What are intelligent agents? How can they be used to benefit businesses?

Intelligent agents are software programs that use a built-in or learned knowledge base to
carry out specific, repetitive tasks for an individual user, business process, or software
application. By watching the user of a program or system, an intelligent agent may
customize the software system to meet the user’s needs, reducing software support costs.
Intelligent agents can be used as wizards to help users do or learn how to perform a given
task. Intelligent agents can be used to carry out “smart” searches of the database, data
warehouse, or the Internet, reducing search costs and avoiding the problems of
misdirected searches.

Application Software Exercise

Students will need to find an expert system tool that provides a mechanism, called the
inference engine, which automatically matches facts against patterns and determines
which rules are applicable.

Remind them about what “rules” the expert system is looking for: the “if” portion of a rule
can actually be thought of as the “whenever” portion of a rule since pattern matching
always occurs whenever changes are made to facts. The “then” portion of a rule is the set
of actions to be executed when the rule is applicable. The actions of applicable rules are
executed when the inference engine is instructed to begin execution. The inference engine
selects a rule and then the actions of the selected rule are executed (which may affect the
list of applicable rules by adding or removing facts). The inference engine then selects
another rule and executes its actions. This process continues until no applicable rules
remain.

If they want a good resource for their PDA, try

http://www.bitsys.demon.co.uk/download.htm. This expert system for the palm is a trial
version of the ZEN Expert System. The trial version is free to use but will only operate with
the demonstration knowledge base.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-10

Other sites to direct students to include:

PC AI - Expert systems resources
http://www.pcai.com/pcai/New_Home_Page/ai_info/expert_systems.html
This site hosts a brief introduction to expert systems and an extensive collection of links to
expert system Web sites, vendors, articles, and references.

The solution requires a very simple system with a limited number of rules. If students can’t
find expert system software to work with, they can build a primitive system using
spreadsheet software and the =IF function of Excel. Although Excel allows for a limited
number of nested IF statements, the conditions tested are complex. The spreadsheet
solution provided here implements each IF statement in a separate worksheet cell. The
instructor may want to implement these rules in another way.

Group Project
With a group of three or four classmates, select two groupware products such as
Lotus Notes, OpenText LiveLink, or Groove and compare their features and
capabilities. To prepare your analysis, use articles from computer magazines and
the Web sites for the groupware vendors. If possible, use electronic presentation
software to present your findings to the class.

Information about LiveLink can be found at http://www.opentext.com/. Information about

Lotus Notes can be found at http://lotus.com, and information about Groove can be found
at http://www.groove.net. Students should find that the three products have different
intended purposes. Notes, or more properly Notes and Domino, are more general-purpose
communication tools with collaboration built-in. Your students should look at the
applications of each tool; the Lotus sites have example applications. Some may have
Lotus Notes databases that they have helped build. Livelink is a straightforward
collaboration tool. Have students investigate the ease of use of each product. Getting the
maximum use of Lotus requires overcoming a rather steep learning curve.

Case Study – Can Boeing Keep Flying High?

1. Analyze Boeing and its business strategy using the value chain and competitive
forces models.

Boeing produces quality passenger planes, business jets, fighter planes, helicopters, flight
instruments, satellites, and missiles. Before the entry of Airbus Industries into the jumbo jet
market, Boeing was the exclusive manufacturer. Airbus Industries is now giving Boeing
stiff competition. Airbus's A380 has lower operating costs than Boeing, and Airbus can
build more modern technology into its planes, and it uses similar cockpit designs. New
entrants into this market must make a significant investment. Airbus Industries is
subsidized by the British and French governments. Also, the market for commercial
airplanes is shrinking.

To remain competitive, Boeing shifted its focus from the jumbo jet market to smaller, faster
airliners, building airliners that will fly nonstop from the departure location to the
destination. Boeing also wants to attract more first class and business-class passengers.

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-11

Additionally, Boeing's CEO is moving the company to offer maintenance, modifications,

financing, and pilot training services, as well as shifting its focus to include new
businesses based on information and communications technologies. Many of Boeing's
new initiatives and services are discussed in the case.

Before Boeing moved to its "paperless design" model, its business processes were very
inefficient. Boeing's production process was paper-intensive; a lack of coordination
between its engineering and manufacturing units existed; its engineers worked in their own
areas and did not easily and readily communicate. In an effort to improve its value chain,
Boeing moved to a "paperless design" model. This allowed the company to dramatically
improve its procurement, technology, inbound logistics, operations, and outbound logistics.

2. Summarize the business and technology conditions that caused Boeing to change
its business strategy. What management, organization, and technology problems
prompted this change?

Increased competition, a shrinking commercial airplane market, and a decrease in air

travel are several business conditions that impacted Boeing. The case mentions numerous
management, organization, and technology problems. To facilitate class discussion,
several of these problems are summarized in the following paragraphs.

Boeing management had problems with inventory management and needed to

standardize designs and to design units that required fewer parts. Management wanted to
reduce procurement costs and lower costs by using technology to improve its inefficient
business processes. Management also wanted to establish design-production teams; the
formation of these teams encouraged group collaboration and assembled designers and
fabricators from a range of specialties.

Engineers worked in "separate fiefdoms" and did not share information. Boeing had
trouble coordinating with external and internal suppliers. It also needed to improve
customer service and provide its 172 000 employees and customers with access to much
needed information.

Before its systems renovations, 800 computers were used to manage the coordination of
engineering and manufacturing. Also, multiple parts lists existed and required conversion.
To support production, Boeing used 400 software programs, each with their own
database. Because of acquisitions, Boeing had 18 separate EDI connections for each of
its suppliers. Boeing employees were connected to hundreds of different intranets, causing
data and application sharing problems.

3. How did Boeing change its business processes and information systems to support
its strategy? How do Boeing’s information systems provide value?

Boeing streamlined and simplified the processes of configuring and assembling airplanes.
Management replaced its 400 software programs with four interconnected, off-the-shelf
software packages, enabling employees to work from the same database. Management
replaced the engineer fiefdoms with design-production teams, used Internet technology to
move all purchasing online, and created its Commercial Aviation Web portal, enabling its
customers to access engineering drawings, manuals, official service bulletins and to
interact with Boeing engineers. Boeing participates in Exostar, which is a global electronic
marketplace for the aerospace and defense industry. Boeing uses its knowledge

Copyright © 2005 Pearson Education Canada Inc.

Instructor's Manual, Chapter 14 Management Information Systems, Second Canadian Edition Page 14-12

management system to provide its engineers with access to maintenance and support
information, saving the service engineers the many hours required to research a question.
Boeing employees now use a portal to access and share common data and applications
over the Web. This portal enables designers to electronically collaborate.

4. What is the relationship of knowledge management to Boeing's business strategy?

How is Boeing using knowledge management to execute its business model and
business strategy?

Knowledge management is crucial to Boeing's strategy. Boeing is using knowledge

management to create, store, transfer, and apply knowledge within the company. Ask your
students to provide specific examples.

5. Evaluate Boeing's new business strategy? What management, organization, and

technology issues will Boeing face as it attempts to implement the strategy? What
role will knowledge management play in this strategy? How successful will Boeing
be in pursuing that strategy?

You can use the suggested answers provided in Question 1 to facilitate discussion for this
question. Knowledge management will play a crucial role in Boeing's strategy, since
Boeing's strategy involves switching to newer businesses based on information and
communications technologies. Student opinions about Boeing's success will vary.

Copyright © 2005 Pearson Education Canada Inc.