Managing The Digital Firm

Management
Information Systems
Managing the Digital Firm
1
Management Information Systems
Chapter - Managing the Digital Firm
DaimlerChrysler Case

a n
Challenge: 104 plants, 37 countries, 14,000 suppliers
K
 Solutions: Integrated Volume Planning hSystem connects
A .
demand side of business with suppliers, reducing
inventories.
M .
 Powerway helps 3,400 b y
suppliers track parts and quality,
reducing errors. ed
ar
 DemonstratespIT’s role in operational excellence, better
r e
P
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
Chapter: Managing the Digital Firm
Source: Management Information System Kenneth C. Laudon, Jane P. Laudon
2
WHY INFORMATION SYSTEMS?
Why Information Systems Matter
a n
Kh
There are four reasons why IT makes a difference to the success of a
business:
A .
• Capital management
M .
b y
d
Foundation of doing business
•
a r e
Productivity
p
•
e
• Pr
Strategic opportunity and advantage

3
Capital Management:
IT is the largest single component of capital investment in the United

a n
Kh
•
States.
A .
•
M .
About $1.8 trillion is spent each year by American businesses.
•
b y
Managers and business students need to know how to invest this
capital wisely.
e d
a r
•
e p
The success of your business in the future may well depend on how
P
you make ITr investment decisions.

4
Information Technology Capital Investment
a n
. Kh
. A
y M
d b
ar e
ep
Pr
Source: Based on the data in U.S. Department of

Commerce, Bureau of Economic Analysis, National 5
Income and Product Accounts, Tables 5.2 and 5.8,
2004.
Foundation of doing business:

• Most businesses today could not operate without extensive use of
a n
Kh
information systems and technologies.
A .
IT can increase market share.
.
•
y M
b
IT can help a business become a high-quality,
•
low-cost producer.
e d
IT is vital to the ar
p development of new products.
•
e
Pr

6
The Interdependence between Organizations and

Information Systems
a n
. Kh
. A
y M
d b
ar e
ep
Pr

7
Productivity:
• IT is one of the most important tools managers have to increase
productivity and efficiency of businesses.
a n
K h
•
A . For firms this means IT is
According to the Federal Reserve Bank, IT has reduced the rate of
a major factor in reducing costs. .

inflation by 0.5 to 1% in the last decade.
y M
It is estimated that IT hasb
ddecade. For firms this means IT is a major
increased productivity in the economy
•
e
r capital efficiency.
by about 1% in the last
a
source of labor and
e p
Pr

8
Strategic Opportunity and Advantage:
a n
Kh
 Create competitive advantage: IT makes it possible to develop
competitive advantages.
A .

M .
New Business Models: Dell Computer has built its competitive
y
advantage on an IT enabled build-to-order business model that
b
e d
other firms have not been able to imitate.
a r
e p
Pr

9
Strategic Opportunity and Advantage:
 Create new services: eBay has developed the largest auction

a n
trading platform for millions of individuals and businesses.
. Kh
A
Competitors have not been able to imitate its success.
.
 Differentiate yourself from your M
ythe United States on the strength of its
competitors: Amazon has become
b
the largest book retailer in
huge online inventorydand recommender system. It has no rivals
in size and scope.re
p a
r e
P

10
How Much Does IT Matter?
 Carr has written that whatever advantages firms build using IT

a n
can be easily copied by competitors.
. Kh
.
This view is not supported by theAevidence: Amazon, eBay, Dell,
Wal-Mart and Apple's iTunesM

b y are just a few firms that have built

and maintained technology-based advantages.
e d
a r
e p
Pr

11
How Much Does IT Matter?
 Commoditization of technology is typically a spur to innovation

a n
and new business models, products and services.
. Kh
A
Competitive advantage derives.not from the technology, but on
M

y
how businesses use the technology.
b
e d processes, management and
rnot easily copied from one firm to another.
Innovations in business

p a
organization are
e
Pr

12
Why IT Now? Digital Convergence and the Changing

Business Environment
a n
. Kh
. A
Growing impact of IT in business firms can be
assessed from the following five factors:
y M

d b
Internet growth and technology convergence
a r e

e p
Transformation of the business enterprise
P r

13
Why IT Now? Digital Convergence and the Changing

Business Environment (Continued)
a n
. Kh

. A
Growth of a globally connected economy

y M
Growth of knowledge and information-based economies
b
d firm
Emergence of theedigital

ar
e p
Pr

14
The Internet and Technology Convergence:
a n
Kh
 Growth of the Internet: 120 million online in the United States,
500 million global users
A .
The Internet is bringing about .

y M a convergence of
telecommunications and computing: VoIP telephones.
d b
a r e
e p
Pr

15
The Internet and Technology Convergence:
 Growth in e-business, e-commerce, and e-government

a n
. Kh

. A
Internet is bringing about rapid changes in markets and market
M
structure: financial services and banking such as eTrade.com.
The Internet is makingb

y
dmusic store and video store.
many traditional business models

r e
obsolete: the corner
a
e p
Pr

16
Transformation of the Business Enterprise:
a n
 Flattening
. Kh
. A
 Decentralization
y M
 Flexibility
d b
ar e
ep
Pr

17
Transformation of the Business Enterprise (Continued):

a n
 Location independence
. Kh
. A

y M
Low transaction and coordination costs
 Empowerment
d b
a r e

ep
Collaborative work and teamwork
P r

18
Globalization:
 Management and control in a global marketplace

a n
. Kh
 Competition in world markets
. A
y M
b
 Global workgroups
e d

a r
Global delivery systems
e p
Pr

19
Rise of the Information Economy:
a n

K h
Knowledge and information-based economies
A .
New products and services .

y M

d b
Knowledge as a central productive and strategic asset
a r e
e p
Pr

20
Rise of the Information Economy (Continued):
a n
Time-based competition
Kh

A .
 Shorter product life
M .
Turbulent environmentb
y
d

a e
r knowledge base

e p
Limited employee
Pr

21
The Growth of the Information Economy
a n
. Kh
. A
y M
d b
ar e
ep
Pr
Chapter: Managing the DigitalSource:

Firm U.S. Department of Commerce, Bureau of the 22
Source:
Census, Management
Statistical AbstractInformation System
of the United Kenneth
States, 2003, C. Laudon, Jane P. Laudon
Table 615; and Historical Statistics of the United States,
Colonial Times to 1970, Vol. 1, Series D, pp. 182-232.
Emergence of the Digital Firm:
a n
Kh
 Digitally enabled relationships with customers, suppliers, and
employees
A .

M .
Core business processes accomplished using digital networks
b y

e d
Digital management of key corporate assets
a r
ep
Pr

23
Emergence of the Digital Firm (Continued):
a n
Kh
 Agile sensing and responding to environmental changes

A .
Seamless flow of information within the firm, and with strategic
partners
M.
by
e d
ar
ep
Pr

24
The Emerging Digital Firm
a n
. Kh
. A
y M
d b
ar e
ep
Pr

25
PERSPECTIVES ON INFORMATION SYSTEMS
What Is an Information System?
a n
K h
Technology perspective: A set of interrelated components
(or retrieve), process, store, and distribute.information
that collect
to support
. A
decision making and control in an organization
y M
d b
a r e
e p
Pr

26
What is an Information System? (Continued)
a n
K h such as business

A .
Data: Streams of raw facts representing events
.
transactions
y M

d b
Information: Clusters of facts
beings in the processes such
meaningful and useful to human
as making decisions
ar e
e p
P r

27
Data and Information
a n
. Kh
. A
y M
d b
ar e
ep
Pr

28
Functions of an Information System
a n
. Kh
. A
y M
d b
ar e
ep
Pr

29
Computer-Based Information System (CBIS)
a n
Rely on computer hardware and software h
•
. K
. A
•
y M
Processing and disseminating information
•
d b
Fixed definitions of data and procedures
a r e
•
e p
Collecting, storing, and using information
P r

30
A Business Perspective on Information Systems
a n
Kh
Information systems are more than just technology.
Businesses invest in IS in order to create value and increase profitability.
A .
M .
b yorganizational and management solution
•
e dthat arise from the business environment.
Information systems are an
r
to business challenges
a

e p
Pr

31
A Business Perspective on Information Systems (Continued)
a n
• Based on information technology but alsoK h significant
require
A .
investment in organizational and management changes and
innovations
M .
• b
IS create value primarily by y
changing business processes and
management decision d
a r e making.
e p
P r

32
The Business Information Value Chain
a n
. Kh
. A
y M
d b
ar e
ep
Pr

33
Information Systems Are More than Computers
a n
. Kh
. A
y M
d b
ar e
ep
Pr

34
• Information systems literacy: Broad-based understanding of

information systems that includes behavioral knowledge about
a n
organizations, management and individuals using information
.
systems as well as technical knowledge about computers Kh
. A
Computer literacy: Knowledge M
focusing on understanding y
• about information technology,
d b how computer technologies work

a r e
e p
Pr

35
Major Business Functions Rely on Information Systems
a n
Kh
• Sales and marketing
A .
Manufacturing
.
•
y M
b
• Finance
e d
• Accounting
a r
ep
•
P r
Human resources

36
Dimensions of Information Systems
a n
Kh
Three Important Dimensions of Information Systems
 Organizations
A .
 Managers
M.
 Technology by
e d
a r
ep
P
You will need to r
understand and balance these dimensions of information
systems in order to create business value.

37
The Organizational Dimension of Information Systems
a n
Kh
 People
 Structure
A .
 Business processes M.
by
 Culture
e d
 Politics
ar
ep
Pr

38
The Management Dimension of Information Systems
Managers are:
a n
• Sense makers
. Kh
Decision makers . A
M
•
• Planners
by
e d
•
a r
Innovators of new processes
e p
r
Leaders: set agendas
•
P

39
The Management Dimension of Information Systems

(Continued)
a n
K h systems in
A . to success with
Managers who can understand the role of information
creating business value are the key ingredient
M .
systems, and cannot easily be replicated by your competitors.
b y
e d
a r
e p
Pr

40
The Technology Dimension of Information Systems
Information technology is one of the tools managers use to cope with

a n
change:
. Kh
A
• Hardware: Physical equipmentM.
b y
•
e d
Software: Detailed preprogrammed instructions
a rmedia for storing data and the software

•
e p
Storage: Physical
Pr

41
The Technology Dimension of Information Systems (Continued)
a n
K h from one physical
.
• Communications technology: Transfers data
location to another
. A
• Networks: Links computers toM
by share data or resources
e d
ar
e p
P r
Managers need to know enough about information technology to make
intelligent decisions about how to use it for creating business value.

42
Complementary Assets and Organizational Capital
a n
Kh
Complementary assets:
New business processes A.

.
•
• Management behavior
y M
Organizational culture d
b
•
r e
p a
Training
e
•
P r

43
Organizational capital:
• Supportive business culture that values efficiency and

a n
effectiveness
. Kh
•
. A
Efficient business processes, decentralization of authority
Highly distributed decision y

M
•
b rights
d (IS) development team
A strong informationesystem
•
a r
e p
Pr

44
Variation in Returns on Information Technology Investment
a n
. Kh
. A
y M
d b
ar e
ep
Pr
Source: Based on Erik Brynjolfsson and Lorin M.
Hitt, “Beyond Computation: Information Technology,
Organizational Transformation and Business 45
Source: Management
Performance.” Information
Journal of Economic System Kenneth C. Laudon, Jane P. Laudon
Perspectives
14, no. 4 (Fall 2000). Used with permission of the
American Economic Association.
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Sociotechnical Systems
a n
Optimize systems performance:
. Kh
Technology and organization .
A
M

y
Organizations mutuallybadjust to one another until fit is

e d
satisfactory
ar
e p
Pr

46
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
A Sociotechnical Perspective on Information Systems
a n
. Kh
. A
y M
d b
ar e
ep
Pr

47

Managing The Digital Firm

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Management

Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Why Information Systems Matter

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

IT is the largest single component of capital investment in the United

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Information Technology Capital Investment

Source: Based on the data in U.S. Department of

WHY INFORMATION SYSTEMS?

Foundation of doing business:

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

The Interdependence between Organizations and

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

a major factor in reducing costs. .

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Strategic Opportunity and Advantage:

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Strategic Opportunity and Advantage:

 Create new services: eBay has developed the largest auction

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

How Much Does IT Matter?

 Carr has written that whatever advantages firms build using IT

b y are just a few firms that have built

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

How Much Does IT Matter?

 Commoditization of technology is typically a spur to innovation

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Why IT Now? Digital Convergence and the Changing

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Why IT Now? Digital Convergence and the Changing

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

The Internet and Technology Convergence:

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

The Internet and Technology Convergence:

 Growth in e-business, e-commerce, and e-government

The Internet is makingb

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Transformation of the Business Enterprise:

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Transformation of the Business Enterprise (Continued):

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

 Management and control in a global marketplace

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?

Rise of the Information Economy:

Chapter: Managing the Digital Firm

WHY INFORMATION SYSTEMS?