Week one:

Information Systems in Business Today

How Information Systems Are Transforming Business

Information systems are impacting businesses in the following ways:

1- Increased e-commerce

2- Emerging mobile digital platforms

3- Growing business use of “big data”

4- Growth in cloud computing

5- New government regulations affect business responsibilities

6- Shifts in media: more news delivered online

Globalization

Globalization has created challenges as well as opportunities. Globalization has:

“flattened” the world, and

the Internet has drastically reduced costs of operating on global scale

The Emerging Digital Firm

- Significant business relationships are digitally enabled and mediated

- Core business processes are accomplished through digital networks

- Key corporate assets are managed digitally

- Digital firms offer greater flexibility in organization and management

Take a moment to review the strategic business objectives of information systems.

1Operational excellence

2New products, services, and business models

3Customer and supplier intimacy

4Improved decision making

5Competitive advantage

6Survival

Operational Excellence:

- Improvement of efficiency to attain higher profitability

- Information systems, and technology an important tools in achieving greater efficiency and productivity
- Walmart’s Retail Link system links suppliers to stores for a superior replenishment system

New Products, Services, and Business Models:

- Business model: describes how a company produces, delivers, and sells a product or service to create wealth

- Information systems and technology are major enabling tools for new products, services, and business models

- Examples: Apple’s iPad, Google’s Android OS, and Netflix

Customer and Supplier Intimacy:

- Serving customers well leads to customers returning, which raises revenues and profits

- Example: High-end hotels that use computers to track customer preferences and used to monitor and customize the
environment

- Intimacy with suppliers allows them to provide vital inputs, which lowers costs

- Example: Nygard’s information system which links sales records to a contract manufacturer

Improved Decision-Making:

- Without accurate information managers must use forecasts, best guesses, luck

- Results in

/Overproduction and underproduction

/Misallocation of resources

/Poor response times

/Poor outcomes raise costs, lose customers

Competitive Advantage:

- Delivering better performance

- Charging less for superior products

- Responding to customers and suppliers in real-time

- Examples: Apple, Walmart, UPS

Survival:

- Information technologies as a necessity of business

- Industry-level changes

- Example: Citibank’s introduction of ATMs

/Governmental regulations requiring record-keeping

Information Technology: The hardware and software that a firm needs to achieve business objectives.

Information Systems: A set of interrelated components that:

- Collect, process, store, and distribute information

- Support decision-making, coordination, and control

Information vs Data:

- Data are streams of raw facts.

- Information is data shaped into meaningful form

There are four activities of information systems.

1- input: Captures raw data from an organization or external environment

2- processing: Converts raw data into meaningful form

3- output: Transfers processed information to people or activities that use it

4- feedback: Output returned to members of the organization to help them evaluate or correct the input and/or processing

Computer/Computer Program vs. Information Systems:

- Computers and software are the technical foundation and tools, similar to the material and tools used to build a house.

- Information Systems is an integral part of organizations.

/the key elements of an organization: people/ structure/ business processes/ politics/ culture

Hierarchy of Authority and Responsibility:

Organizations are structured around the following hierarchy:

-Senior management

-Middle management

-Operational management

-Knowledge workers

-Data workers

-Production or service workers

There are also business functions within an organization such as:

-Sales and marketing

-Finance and Accounting

-Manufacturing and production

Management and Technology Dimension of Information Systems:

Managers set organizational strategies for responding to business challenges. In addition, managers must act creatively to
create new products and services and occasionally recreate the organization.

The technology dimension of information systems includes:

-Computer hardware and software

-Data management technology

-Networking and telecommunications technology

-Networks, the Internet, intranets and extranets, World Wide Web

-IT infrastructure: provides a platform that the system is built on

Creating Value:

Information systems are instrumental in creating value. Investments in information technology will result in the following:

-Superior returns

-Productivity increases

-Revenue increases

-Superior long-term strategic positioning

Contemporary Approaches to Information Systems:

1- Technical Approach: Emphasizes mathematically based models/ Computer science, management science, operations
research

2- Behavioral Approach: Behavioral issues (strategic business integration, implementation, etc.)/ Psychology, economics,
sociology

- Business Model: An abstraction of what an enterprise is and how it delivers products and services.

- Information: Data that have been shaped into a form that is meaningful and useful to human beings.

- Information Technology (IT): The hardware and software technologies a firm needs to achieve its
business objective.
 - Management Information Systems: The study of information systems focusing on their use in business
and management.

- World Wide Web: System with universally accepted standards for storing, retrieving, and formatting
data.

- Networking and Telecommunications: Physical devices and software that link various computer
hardware components.

- Information system: interrelated components working together to collect, process, store, and disseminate
information to support decision making.

- computer literacy: focused primarily on knowledge of information technology

- culture: the set of fundamental assumptions about what products the organization should produce, how, and where
it should produce them

- data: streams of raw facts representing events occurring in an organization or the physical environment before they
have been organized.

The impact of IS on business is quite huge and ubiquitous.

◼ In 2019, global spending on information technology (IT) and IT services was nearly $3.8 trillion.

◼ In addition, firms spent another $160 billion on management consulting and services - which involves redesigning firms’
business operations to take advantage of these new technologies (Statista, 2020).

 Information system breeds Innovation and vice versa.

Globalization has created challenges as well as opportunities. Globalization has:

❑ “flattened” the world, and

❑ the Internet has drastically reduced the costs of operating on a global scale (think born global firms like Airbnb and MNCs
like FB)

 In the 21st Century Emerging Digital Firm:

❑ Significant business relationships are digitally enabled and mediated

❑ Core business processes are accomplished through digital networks

❑ Key corporate assets are managed digitally

❑ Digital firms offer greater flexibility in organization and management

There is a growing interdependence between a firm’s ability to use information technology and its ability to implement
corporate strategies and achieve corporate goals.

 What a business would like to do in five years often depends on what its systems will be able to do.

In contemporary systems, there is a growing interdependence between a firm’s information systems and its business
capabilities

 Businesses and firms invest heavily in information systems to achieve six strategic business objectives:

◼ Operational excellence – efficiency, productivity

◼ New products, services, and business models

◼ Customer and supplier intimacy

◼ Improved decision making – Big data, instant data

◼ Competitive advantage

◼ Survival

Information technology (IT) consists of all the hardware and software that a firm needs to use in order to achieve its business
objectives.

◼ These include computers, storage devices, mobile devices, and software.

 An information system can be defined technically as a set of interrelated components that collect (or retrieve), process,
store, and distribute information to support decision-making and control in an organization.

◼ In addition, information systems may also help managers and workers analyze problems, visualize complex subjects, and
create new products.

Data are streams of raw facts

 Information is data shaped into meaningful form

Dimensions of Info Systems

 To fully understand information systems, it’s important that the broader dimensions in which it operates are understood.

 These dimensions include organization, management, and information technology

◼ These dimensions have the power to provide solutions to challenges and problems in the business environment.
Business Perspective on IS

 Managers and firms invest in information technology and systems because they provide real economic value to the
business. The decision to build or maintain an information system assumes that the returns on this investment will be
superior to other investments in buildings, machines, or other assets.

◼ These superior returns include increased productivity, increased revenues superior long-term strategic positioning of the
firm in certain markets

 The value of an information system to a business, as well as the decision to invest in any new information system, is largely
determined by the extent to which the system will lead to better management decisions, more efficient business processes,
and higher firm profitability.

Complementary IS Assets

 Awareness of the organizational and managerial dimensions of information systems can help us understand why some firms
achieve better results from their information systems than others.

 However, not every firm that invests in IS reaps the same level of benefit or value. This potential variation lies in
complementary assets a firm has to its IS.

 Complementary assets are those assets required to derive value from a primary investment. These can be organizational,
Managerial or Social.

Complementary IS Assets

 Organizational Assets:

◼ Supportive organizational culture, Appropriate business model & processes, Strong IS team, Decentralized authority

 Managerial Assets:

◼ Strong Senior Management, Incentives for innovation, Teamwork & Collaboration, Training

 Social Assets:

◼ Internet and Telco infrastructures, laws & regulations, IT Literate labor force.

Key Take Aways

 There is a growing interdependence between a firm’s ability to use information technology and its ability to implement
corporate strategies and achieve corporate goals.

 Businesses and firms invest heavily in information systems to achieve six strategic business objectives: Operational
excellence, New business models, Customer and supplier intimacy, Improved decision-making, Competitive advantage, and
Survival.

 The company’s complementary assets are required to reap the benefits of IS appropriately.