Transcript 11. Building Information Systems

RELATIONSHIP
BETWEEN
INFORMATION
SYSTEMS,
ORGANIZATIONS
AND BUSINESS
PROCESSES
3.1
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OBJECTIVES
• What do managers need to know about
organizations in order to build and use
information systems successfully?
• What impact do information systems have
on organizations?
• How do information systems support the
activities of managers in organizations?
3.2
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MANAGEMENT CHALLENGES
• Sustainability of competitive
advantage.
• Fitting technology to the
organization
( or vice-versa)
3.3
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ORGANIZATIONS AND INFORMATION SYSTEMS
The Two-Way Relationship Between Organizations and Information Technology
ORGANIZATIONS
MEDIATING FACTORS:
Environment
Culture
Structure
Standard Procedures
Politics
Management Decisions
Chance
INFORMATION
TECHNOLOGY
Figure 3-1
3.4
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ORGANIZATIONS AND INFORMATION SYSTEMS
Organization:
• Stable, formal structure
• Takes resources from environment and
processes them to produce outputs
3.5
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ORGANIZATIONS AND INFORMATION SYSTEMS
Technical Microeconomic Definition of the Organization
Figure 3-2
3.6
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ORGANIZATIONS AND INFORMATION SYSTEMS
Behavioral definition of Organization:
• Collection of rights, privileges, obligations,
responsibilities
• Delicately balanced
• Conflict resolution
3.7
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COMMON FEATURES OF ORGANIZATIONS
The Behavioral View of Organizations
3.8
Figure 3-3
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ORGANIZATIONS AND INFORMATION SYSTEMS
Common Features of Organizations
1. Organizations are bureaucracies that have certain structural features
2. Structural Characteristics of Organizations:
• Clear division of labor
• Hierarchy
• Explicit rules and procedures
• Impartial judgments
3.9
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ORGANIZATIONS AND INFORMATION SYSTEMS
Common Features of Organizations
Structural Characteristics of Organizations
(cont.):
• Technical qualifications for positions
• Maximum organizational efficiency
3.10
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ORGANIZATIONS AND INFORMATION SYSTEMS
Common Features of Organizations
Standard Operating Procedures:
• Precise rules, procedures, and practices
• Enable organizations to cope with all
expected situations
3.11
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ORGANIZATIONS AND INFORMATION SYSTEMS
Common Features of Organizations
Organizational Politics:
• Divergent viewpoints leads to political
struggle, competition, and conflict
• Hamper organizational change
3.12
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ORGANIZATIONS AND INFORMATION SYSTEMS
Common Features of Organizations
Organizational Culture: A set of
fundamental assumptions about:
• What products the organization should
produce
• How and where it should produce them
• For whom they should be produced
3.13
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ORGANIZATIONS & INFORMATION SYSTEMS
Unique Features of Organizations
All organizations have different:
• Structures/Organizational types
• Goals
• Constituencies
• Leadership Styles, Tasks
• Surrounding Environment
3.14
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ORGANIZATIONS & INFORMATION SYSTEMS
Organizational Structures
• Entrepreneurial: Start up business
• Machine bureaucracy: Midsize
manufacturing firm
• Divisionalized bureaucracy: Fortune 500
• Professional bureaucracy: Law firms,
hospitals, school systems
• Adhocracy: Consulting firm
3.15
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ORGANIZATIONS & INFORMATION SYSTEMS
Organization and Its Environment
Figure 3-4
3.16
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ORGANIZATIONS AND INFORMATION SYSTEMS
Other Differences Among Organizations
• Ultimate goal
• Different groups and constituencies
• Nature of leadership
• Tasks and technology
3.17
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Information Technology Infrastructure and Information Technology Services
Information systems department:
• Formal organizational unit
• Responsible for information systems in
the organization
3.18
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Information Technology Services
Figure 3-5
3.19
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Information Technology Infrastructure and Information Technology Services
Includes specialists:
• Programmers: Highly trained, write
software
• Systems analysts: Translate business
problems into solutions, act as liaisons
between the information systems
department and rest of the organization
3.20
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Information Technology Infrastructure and Information Technology Services
Specialists (cont.):
• Information system managers:
Leaders of various specialists
teams
• Chief information officer (CIO): Senior
manager in charge of information systems
function in the firm
• End users: Department representatives
outside the information system
department for whom applications are
developed
3.21
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
How Information Systems Affect Organizations
ECONOMIC IMPACTS
Economic Theories :
• Information technology is a factor of
production, like capital and labor.
Transaction Cost Theory:
• Firms can conduct marketplace
transactions internally more cheaply to
grow larger.
3.22
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Transaction Cost Theory
3.23
Figure 3-6
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
How Information Systems Affect Organizations
ECONOMIC IMPACTS (contd.)
• Agency Cost Theory: Firm is nexus of
contracts among self-interested parties
requiring supervision.
3.24
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Agency Cost Theory
3.25
Figure 3-7
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
How Information Systems Affect Organizations
ORGANIZATIONAL AND BEHAVIORAL IMPACTS
Behavioral Changes :
• Information technology could change
hierarchy of decision making
• Lower cost of information acquisition
• Broadens the distribution of information
3.26
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
How Information Systems Affect Organizations
Organizational & Behavioral Impact (contd.)
Virtual Organization:
• Task force networked organizations.
• Uses networks to link people, assets, and
ideas to create and distribute products
and services without being limited to
physical locations
3.27
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
How Information Systems Affect Organizations
Organizational & Behavioral Impacts (cotd.)
Increasing the Flexibility of Organization
1. Increasing the ability :
– To sense and respond to changes in
marketplace.
– To take advantage of new opportunities,
2. Mass customization,
3. Micromarketing for niche products
3.28
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THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS
Implementing Change and Managing Organizational
Resistance Made Easier
3.29
Figure 3-8
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
1. I.T. has reduced information uncertainty.
2. Affect on Roles of Managers in
Organizations :
• Interpersonal: Managers act as
figureheads and leaders
• Informational: Managers receive and
disseminate critical information, nerve
centers
• Decisional: Managers initiate activities,
allocate resources, and negotiate
conflicts
3.30
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Managers and Decision Making
Process of Decision Making at Various
Management levels :
• Strategic Decision Making:
Determines long-term objectives,
resources, and policies.
• Management Control: Monitors
effective or efficient usage of resources
and performance of operational units
3.31
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Managers and Decision Making
Process of Decision Making at Various
Management Levels (contd.)
• Operational Control: Determines how to
perform specific tasks set by strategic and
middle-management decision makers
• Knowledge-level Decision Making:
Evaluates new ideas for products,
services, ways to communicate new
knowledge, ways to distribute information
3.32
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Managers and Decision Making
Decisions are classified as:
• Unstructured: Non routine, decision
maker provides judgment, evaluation, and
insights into problem definition, no
agreed-upon procedure for decision
making.
• Structured: Repetitive, routine, handled
using a definite procedure.
3.33
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
TYPE OF
DECISION
STRUCTURED
Different Kinds of Information Systems
Organizational Level
OPERATIONAL
KNOWLEDGE
ELECTRONIC
SCHEDULING
OAS
PRODUCTION
COST OVERRUNS
MIS
BUDGET
PREPARATION
SEMISTRUCTURED
PROJECT
SCHEDULING
DSS
KWS
3.34
STRATEGIC
ACCOUNTS
RECEIVABLE
TPS
UNSTRUCTURED
MANAGEMENT
PRODUCT DESIGN
Figure 3-9
FACILITY
LOCATION
ESS
NEW PRODUCTS
NEW MARKETS
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Stages of Decision Making
(all supported by IT)
• Intelligence: Collect information, identify
problem.
• Design: Conceive alternative solution to a
problem
• Choice: Select among the alternative
solutions
• Implementation: Put decision into effect
and provide report on the progress of
solution
3.35
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Decision-Making Process
Figure 3-10
3.36
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Models of Decision Making
• Rational Model: Choosing best
alternative rationally.
• Organizational Model : Group
decision.
• Bureaucratic Model : Based on
SOP
• Political Model : Compromises.
3.37
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Implications for the Design and Understanding of
Information Systems
Factors to consider while planning a
new system:
• Organizational environment
• Organizational structure, hierarchy,
specialization, standard operating
procedures
3.38
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Factors to Consider while Planning a New Systems
(contd.)
• Culture and politics of the organization
• Type of organization and its style of
leadership.
• Groups affected by the system and the
attitudes of workers who will be using the
system.
• Kinds of tasks, decisions, and business
processes, information system is designed
to assist.
3.39
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Implications for the Design and Understanding of
Information Systems
System Characteristics to be kept in
mind while designing new systems:
• Flexibility and multiple options for
handling data and evaluating information
• Capability to support a variety of styles,
skills, and knowledge
3.40
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IMPACT OF INFORMATION TECHNOLOGY ON
MANAGEMENT DECISION MAKING
Implications for the Design and Understanding of
Information Systems
System Characteristics to be kept in
mind while designing new systems:
• Capability to keep track of many
alternatives and consequences
• Sensitivity to the organization’s
bureaucratic and political
requirements.
3.41
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MANAGEMENT CHALLENGES IN COMPLEX
RELATIONSHIP BETWEEN I.S. AND
ORGANIZATIONAL PERFORMANCE
1. Difficulties in Sustaining Competitive
Advantage :- Advantage is for a significant period of time,
- Experience and knowledge helps in new
investment.
2. Difficulties in Managing System Related
Change :
- Change is slowed due to inertia of organizations
- Process of change is complicated and slow.
3.42
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MANAGEMENT CHALLENGES IN COMPLEX
RELATIONSHIP BETWEEN I.S. AND
ORGANIZATIONAL PERFORMANCE
Solution Guidelines :
1. Perform a Strategic System Analysis :
- Study competitive structure of industry of firm,
- Analyze current business, industry and firm’s value
chain
2. Managing Strategic Transitions ( Changes in
goals , relationships with customers / suppliers,
internal operations and information architecture) :
- Devise new business processes for successful
transitions
3.43
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RELATIONSHIP
BETWEEN
INFORMATION
SYSTEMS,
ORGANIZATIONS
AND BUSINESS
PROCESSES
3.44
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