Introduction

 Anil Tatti
     aniltatti [at] simca [dot] ac [dot] in Send mail will reply within 24 hours Walk In Any time You are Welcome If holiday- make it up in next week / available time slot Copy Fail

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Information Systems
Why Do People Need Information?
 Individuals - Entertainment and enlightenment  Businesses - Decision making, problem solving and control

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Data, Information, and Systems

 Data vs. Information
 Data
 A given, or fact; a number, a statement, or a picture  Represents something in the real world  The raw materials in the production of information

 Information
 Data that have meaning within a context  Data in relationships  Data after manipulation

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Data, Information, and Systems

 Data Manipulation
 Example: customer survey
 Reading through data collected from a customer survey with questions in various categories would be time-consuming and not very helpful.  When manipulated, the surveys may provide useful information.

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Data, Information, and Systems

 What Is a System?
 System: A set of components that work together to achieve a common goal  Subsystem: One part of a system where the products of more than one system are combined to reach an ultimate goal  Closed system: Stand-alone system that has no contact with other systems  Open system: System that interfaces with other systems

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Data, Information, and Systems

 Information and Managers
 Systems thinking
 Creates a framework for problem solving and decision making.  Keeps managers focused on overall goals and operations of business.

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Data, Information, and Systems

 The Benefits of Human-Computer Synergy
 Synergy
 When combined resources produce output that exceeds the sum of the outputs of the same resources employed separately

 Allows human thought to be translated into efficient processing of large amounts of data

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Data, Information, and Systems

 The Four Stages of Data Processing
 Input: Data is collected and entered into computer.  Data processing: Data is manipulated into information using mathematical, statistical, and other tools.  Output: Information is displayed or presented.  Storage: Data and information are maintained for later use.

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Why Study IS?

 Information Systems Careers
 Systems analyst, specialist in enterprise resource planning (ERP), database administrator, telecommunications specialist, consulting, etc.

 Knowledge Workers
 Managers and non-managers  Employers seek computer-literate professionals who know how to use information technology.

 Computer Literacy Replacing Traditional Literacy

 Key to full participation in western society

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Ethical and Societal Issues

The Not-So-Bright Side Not-So-

 Consumer Privacy
 Organizations collect (and sometimes sell) huge amounts of data on individuals.

 Employee Privacy
 IT supports remote monitoring of employees, violating privacy and creating stress.

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Ethical and Societal Issues

The Not-So-Bright Side Not-So-

 Freedom of Speech
 IT increases opportunities for pornography, hate speech, intellectual property crime, an d other intrusions; prevention may abridge free speech.

 IT Professionalism
 No mandatory or enforced code of ethics for IT professionals--unlike other professions.

 Social Inequality
 Less than 20% of the worlds population have ever used a PC; less than 3% have Internet access.

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Management Information Related Subsystems

 Information Technology (IT)  is any computer based tool that people use to work with information and support the information-processing needs of an organisation.  Includes Hardware, Software, Communications, networks, production automation, etc  Any Kit concerned with the capture, storage, transmission, and presentation of information

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Pioneers of Traditional / Scientific Management

 5 Key Functions of Management Principles for Organisational Structure
- Unity of Command - Small Spans of Control - Line or Chain of Command - Division of Work - specialism - Delegate Authority & Retain Responsibility

- To Plan - To Organise - To Command - To Co-ordinate - To Control

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Modern Criticisms of Classical Management

 Inhuman working conditions and poor industrial relations  Over-specialisation and restrictive work practices  Bureaucratic organisational structures long chains of command  Inward- looking organisational structures  Closed Systems run out of steam when not conscious of environmental influences

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The Matrix Management

Project Focussed Multi-disciplinary teams Team members have more than one boss Project team disbanded when project completes New project team for new project Gives team members an insight into the workings of other departments Leadership training ground Allows people with ideas to carry them forward May cause blurring of communication lines

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Business Trends
 Changing business environment  Specialization  Management by Methodology and Franchises  Mergers  Decentralization and Small Business  Temporary Workers  Internationalization  Service-Oriented Business  Re-engineering  Recession

 Need for faster responses and flexibility  MIS reflecting these requirements -

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Business Trends & Implications

 Specialisation
 Increased demand for technical skills  Specialized MIS tools  Increased communication

 Methodology & Franchises

     Reduction of middle management Increased data sharing Increased analysis by top management Computer support for rules Re-engineering

 Mergers
 Larger companies  Need for control and information  Economies of scale

 Decentralization & Small Business

 Communication needs  Lower cost of management tasks  Low maintenance technology

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Business Trends & Implications

 Temporary Workers  Managing through rules  Finding and evaluating workers  Coordination and control  Personal advancement through technology  Security  Internationalization  Communication  Product design  System development and programming  Sales and marketing  Service Orientation  Management jobs are information jobs  Customer service requires better information  Speed

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Management Information Systems (MIS)

 Management information system (MIS)
 An MIS provides managers with information and support for effective decision making, and provides feedback on daily operations  Output, or reports, are usually generated through accumulation of transaction processing data  Each MIS is an integrated collection of subsystems, which are typically organized along functional lines within an organization

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Outputs of a Management Information System

 Scheduled reports
 Produced periodically, or on a schedule (daily, weekly, monthly)

 Key-indicator report
 Summarizes the previous days critical activities  Typically available at the beginning of each day

 Demand report
 Gives certain information at a managers request

 Exception report
 Automatically produced when a situation is unusual or requires management action

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Scheduled Report Example

Daily Sales Detail Report Prepared: 08/10/xx Order # P12453 P12453 P12453 P12455 P12456 Customer ID C89321 C89321 C03214 C52313 C34123 Sales Rep ID CAR CAR GWA SAK JMW Ship Date 08/12/96 08/12/96 08/13/96 08/12/96 08J/13/96

Quantity 144 288 12 24 144

Item # P1234 P3214 P4902 P4012 P3214

Amount $3,214 $5,660 $1,224 $2,448 $720

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Key Indicator Report Example

Daily Sales Key Indicator Report This Month Total Orders Month to Date Forecasted Sales for the Month $1,808 $2,406 Last Month $1,694 $2,224 Last Year $1,014 $2,608

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Demand Report Example

Daily Sales by Sales Rep Summary Report Prepared: 08/10/xx Sales Rep ID CAR GWA SAK JWN Amount $42,345 $38,950 $22,100 $12,350

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Exception Report Example

Daily Sales Exception Report ORDERS OVER $10,000 Prepared: 08/10/xx Order # P12453 P12453 P12453 Customer ID C89321 C89321 C03214 Sales Rep ID CAR CAR GWA Ship Date 08/12/96 08/12/96 08/13/96

Quantity 144 288 12

Item # P1234 P3214 P4902

Amount $13,214 $15,660 $11,224

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Outputs of a Management Information System

Earnings by Quarter (Millions) Actual Forecast $11.8 $10.7 $14.5 $13.3 Variance 6.8% 0.9% -1.4% -3.0%

Drill Down Reports Provide detailed data about a situation.

2ND Qtr 1999 1st Qtr 1999 4th Qtr 1998 3rd Qtr 1998

$12.6 $10.8 $14.3 $12.8

Etc. See Figure 9.2

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Characteristics of a Management Information System

 Provides reports with fixed and standard formats
 Hard-copy and soft-copy reports

 Uses internal data stored in the computer system  End users can develop custom reports  Requires formal requests from users

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Management Information Systems for Competitive Advantage

 Provides support to managers as they work to achieve corporate goals  Enables managers to compare results to established company goals and identify problem areas and opportunities for improvement

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Functional Aspects
 MIS is an integrated collection of functional information systems, each supporting particular functional areas.

Schematic

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Internet

An Organizations MIS Financial MIS

Business transactions

Transaction processing Business systems transactions

Databases of valid transactions

Accounting MIS

Drill down reports Exception reports Demand reports

Marketing MIS

Key-indicator reports Scheduled reports

Databases of external data

Human Resources MIS Etc.

Etc.

Extranet

Figure 9.3

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Introduction
 What is MIS?
 Is a system which gives us the  Right information  To the right person  At the right place  At the right time  In the right form  At the right cost

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Role
 Why is it necessary  Increased Business and Management complexities  Who is a Good Manager  One who minimizes / eliminates the elements of risk & uncertainty.  Response Simulator  Enables a decision maker to give either a reactive or proactive response  May be futuristic.

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Characteristics- Sub Systems Characteristics Marketing  Sales Forecasting , Sales Planning, Customer & Sales Analysis.  Manufacturing  Production Planning, scheduling, cost control analysis.  Logistics  Planning & Control of purchasing, inventories, distribution  Personnel  Planning Personnel requirements , Analyzing performance, salary administration. Chapter 1 42

Characteristics.
Finance & Accounting  Financial analysis, cost analysis, capital requirements, planning, income measurement. Information Processing  Information system planning , Cost Benefit analysis. Top Management  Strategic Planning, resource allocation.

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Users & Characteristics

Type of System ESS/EIS DSS Information Inputs
Aggregate data , external , internal Low- Volume data, analytic models

Processing
Graphics; simulations, interactive Interactive; simulations, analysis

Information Outputs
Projections; response to Queries Special reports; decision analysis; response to Queries

Users
Senior Managers Professionals; Staff Managers

MIS

Summary Transaction data; high volume data; simple models

Routine reports; simple models; low level analysis

Summary & exception reports

Middle Managers

KWS

Design Specializations, Knowledge base

Modeling, simulations

Models, Graphics

Professionals; Technical Staff

OAS

Documents, schedules

Document; management; scheduling; communication Sorting; listing; merging; updating

Documents; schedules; mail Detailed reports; list summaries

Clerical Workers

TPS

Transactions; events

Operations; Personnel; Supervisors

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MIS Requirements
        Unified system Should support / facilitate decisions Should be compatible with the organisations structure & culture Should be cost effective / beneficial Should be responsive to changes around & within the organisation. Should be speedy & accurate Should provide validated & valid information Should be Management & not Manipulated Information system.

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Approaches
 Technical Approach  Based on Mathematical & normative models  Relies heavily on physical technology CS , MS, OR  Behavioral Approach  Behavioral impact / response of people Political Science, Psychology, Sociology & organisational Behavior.  Socio-Technical Approach  Borrows from both the above approaches.

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What is Strategy?
Strategy Definitions
 Strategy  A plan  Early 1990s definition:


A well coordinated set of objectives, policies, and plans aimed at securing a long-term competitive advantage. A vision for the organization that is implemented. a careful plan or method the art of devising or employing plans toward a goal the art and science of military command exercised to meet the enemy in combat under advantageous Chapter 1 47 circumstances

 Websters Dictionary
  

Strategic Advantage and IT

Evolution of Strategy Concepts
 Competitive Strategy
 Competitive Advantage


Strategy Speeding Up

Sustainable Competitive Advantage  defensible market position (CQFDS), unique core competence  long-term barriers to competition, non-competitive profits (>0) Temporary (Non-Sustainable) Competitive Advantage Sustainable Strategic Advantage  long-term, dominant strategy, strategic systems, strategic structural changes Temporary Strategic Advantage


 Strategic Advantage


Leverageable Strategic Advantage (Carr)

dominant strategy is only a stepping-stone to future dominant strategies

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Information Systems as a Strategic Resource

 Inwardly Strategic
 focused on internal processes
   

Outwardly Strategic
aimed at direct competition beat competitors
new services new knowledge that leads to new services

lower costs increase employee productivity improve teamwork enhance communication

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Elements of Strategic Management

 Innovation  Response-Management  Long-Range Planning  Competitive Intelligence

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Q1 How does organizational strategy determine information systems structure?

An organizations goals and objectives are determined by its competitive strategy. In turn, an organizations competitive strategy determines every information systems
Structures Features Functions

Fig 3-1 Organizational Strategy Determines Information Systems

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Q2 What Five Forces Determine Industry Structure? You can use Porters Five Forces Model to assess an industry structure based on these five questions:
How much bargaining power do customers have? How much of a threat do substitution products or services pose? How much bargaining power do suppliers have? How great is the threat of new competitors entering the marketplace? How great is the rivalry among existing firms?

The intensity of each force determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be. An organization develops its competitive strategy based on how it intends to respond to these forces.

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Q2 What Five Forces Determine Industry Structure?

Fig 3-2 Porters Five Forces Model of Industry Structure

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Q2 What Five Forces Determine Industry Structure?

Fig 3-3 Examples of Five Forces

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Q3 What is Competitive Strategy A company can choose one of four competitive strategies to help it respond to the structure of its industry. Be the cost leader across its industry Wal-Mart is the lowest cost leader in the retail industry. Differentiate its products from others across its industry Apple Computer competes on how much better its computers are than PCs. Be the cost leader in an industry segment Southwest Airlines is the cost leader in certain portions of the airline industry. Differentiate its product in an industry segment Apples iPhone competes by being different than other cell phones.

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Q3 What is Competitive Strategy

Fig 3-4 Porters Four Competitive Strategies

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Q4 What is a Value Chain?

Each competitive strategy requires a system whose benefits outweigh the risks and provide value to the customer.
Value is defined as the amount of money a customer is willing to spend on a product, service, or resource. The difference between the value that an activity generates and the cost of the activity is the margin. A value chain is a network of value-creating activities and is divided into primary activities and support activities.

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Q4 What is a Value Chain?

Primary Activities in the value chain include:

Inbound logistics activities involve receiving and managing raw materials. Operations activities transform raw materials into final products or create services. Outbound logistic activities deliver finished products to customers. Marketing and Sales activities create marketing strategies and sell products or services to customers. Services activities provide after-sale customer support for products or services.

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Q4 What is a Value Chain?

Support Activities in the value chain indirectly enhance production of products and services.
Firm infrastructure includes general management, finance, accounting, legal, and government affairs (if necessary). Human Resources recruits, compensates, evaluates and trains employees. Technology Development includes research and development for new processes or techniques. Procurement finds suppliers and vendors for raw materials, creates contracts, and negotiates prices of raw materials.

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Q4 What is a Value Chain?

Fig 3-5 Porters Value Chain Model

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Q4 What is a Value Chain?

Each activity in a value chain links to other activities in the value chain. Linkages are the interactions across the value activities. Understanding a companys linkages helps it succeed in designing or redesigning its business process.
Rather than automating or improving existing functional systems, Porter contends companies should create new, more efficient business processes that integrate the activities of the entire value chain.

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Q5 How Do Business Processes Generate Value?

Each company has many business processes which are networks of activities that generate value by transforming inputs into outputs. You determine the cost of each business process by adding the cost of inputs plus the cost of activities used in the process. You determine the margin of each business process by subtracting the cost of the activity from the value of the output.

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Q5 How Do Business Processes Generate Value?

Fig 3-7 Three Examples of Business Processes

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Q5 How Do Business Processes Generate Value?

Each network of activity transforms input resources into output resources. Bicycle parts are transformed into a bicycle through a network of activities, both primary and support. A companys resources, like inventory parts, equipment, or cash, flow between or among all the activities used to produce a product. Facilities, like buildings or banks, store resources used in the companys network of activities.

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Q5 How Do Business Processes Generate Value?

The key to a companys competitive advantage is to increase the margin of its products by adding value, reducing costs, or both. Business process redesign helps a business streamline its activities in order to increase its margins. The most difficult part of process redesign is associated with employee resistance.

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Q5 How Do Business Processes Generate Value?

Fig 3-8 Improved Materials Ordering Process

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Q6 How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?

Each business must first analyze its industry and choose a competitive strategy. Will it be a low-cost provider or differentiate its products from competitors? Then it must design its business processes to span valuegenerating activities. Once those decisions have been made, a business can structure an information system that supports its business processes.

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Q6 How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?

Fig 3-10 Business Process & Information System for Bike Rental

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Q7 How Do Information Systems Provide Competitive Advantages?

There are two ways businesses can respond to the five competitive forces.
They can gain a competitive advantage via their products and services. They can gain a competitive advantage by developing superior business processes.

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Q7 How Do Information Systems Provide Competitive Advantages?

A business can gain a competitive advantage via its products by

Creating new products and services, or Enhancing its existing products or services, or Differentiating its products and services from its competitors

Information systems can help create a competitive advantage by being part of the product or by providing support to the product.

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Q7 How Do Information Systems Provide Competitive Advantages? A company can gain a competitive advantage by using business processes to
Lock in customers via high switching costs, making it too expensive for the customer to switch to a competitor. Lock in suppliers via easy-to-use connections, discouraging them from changing to another business. Create entry barriers for new competitors, thereby raising the costs to enter the market. Establish alliances with other organizations and set standards, reducing purchase costs and providing benefits for everyone. Reduce costs which in turn reduces prices and increases profitability.

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Q7 How Do Information Systems Provide Competitive Advantages?

ABC, Inc, an actual company, used information systems to create a competitive advantages by
Investing heavily in information technology from the beginning and Leading the shipping industry in application of information systems.

The following slide shows some of the Web pages ABC, Inc uses within its information system.

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Q7 How Do Information Systems Provide Competitive Advantages?

Fig3-13 ABC, Inc Web Page to Select recipient from customer records

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Q7 How Do Information Systems Provide Competitive Advantages?

Fig 3-14 ABC, Inc Web page to select contact from customer records

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Q7 How Do Information Systems Provide Competitive Advantages?

Fig 3-15 ABC, Inc Web page to specify email notification

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Q7 How Do Information Systems Provide Competitive Advantages?

ABCs information system helps the company create a competitive advantage by

Enhancing its existing servicesmaking it easy for the customer to use its system, and reducing errors. Differentiating its service from its competitors who dont have a similar service to provide to customers. Providing new services for customers that competitors dont provide. Locking customers into its system based on the benefits they receive from it.

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Q7 How Do Information Systems Provide Competitive Advantages? ABCs competitive advantage continued
Raising barriers for new competitors to enter the market. They will have to provide similar services to customers. Reducing the costs associated with data input and information output.

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Relationship

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Summary
 Strategic Information System Applications  Cost leadership  Differentiation  Growth  Alliances  Innovation  Improve internal efficiency  Customer-oriented approaches

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Functional Use Of MIS

        To lower cost in all parts of Value chain Facilitate product delivery Adding value to quality Transform physical processing component into information component Speed / Ability Competitive Advantage Quality Enhancement Simplification Product , Process, Cycle Time Organisation Benchmark , Customer Service, Precision etc

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Strategic Use
Out perform rivals Product differentiation Focussed differentiation Right linkages to customers & suppliers Low cost Product Precise development of strategies, planning , forecasting & monitoring.  Problem Solving / Decision making
     

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Strategic Uses Contd.

    

Coordinate activities globally Think Globally, act Locally Competitive Advantage More Flexible & Responsive Flexibility

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Information Systems for Competitive Advantage

 Businesses continually seek to establish competitive advantage in the marketplace.  There are eight principles:  The first three principles concern products.  The second three principles concern the creation of barriers.  The last two principles concern establishing alliances and reducing costs.

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Organizational Change
 Organizational change deals with how organizations plan for, implement and handle change. Overcoming resistance to change can be the hardest part of bringing information systems into a business. Too many computer systems and new technologies have failed because managers and employees were not prepared for change.  A change model identifies the phases of change and the best way to implement it:  Unfreezing is the process of removing old habits and creating a climate receptive to change  Moving is the process of learning new work methods, behaviors and systems  Refreezing involves reinforcing changes to make the new Chapter accepted and part of the 84 process second nature,1 job