lecture 2
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Lecture 2. The use of Information systems in business processes. The Organisation. A business process . - PowerPoint PPT PresentationTRANSCRIPT
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Lecture 2
The use of Information systems in business processes
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The Organisation
Production Finance/accounting
Sales/marketing
HumanResources
OrganisationalProblem
OrganisationalLevel
Strategic
Tactical
Knowledge
Operations
Senior Management
General or Middle
Knowledge or Data
Production Workers
Management
Workers
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A business process
• A business process is a set of logically related tasks & behaviors that organization develop to produce specific business results and the manner in which these activities are organized and coordinated.
• ” these activities are designed to produce a specific output for a particular customer or market” and give the firm a competitive advantage in order to generate revenue.
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Some core Business Processes
• Sales/Marketing:– Customer Strategy & Relationships (Marketing)– Customer Acquisition (Sales)
• Finance and accounting– Financial Analysis, Reporting, & Capital
Management– Management Responsibility– Accounting Management
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Some core business processes
• H.R. – Employee Development & Satisfaction
• Production– Product Development– Product/Service Delivery
• Technology Management
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The Digital Firm
• A company/organisation/firm in which all business process with customers, suppliers and employees are digitally “managed”.
• Corporate assets: intellectual property and core competencies (activities and resources that could give a competitive advantage), financial and human assets are digitally managed.
• These firms sense and respond to environmental changes rapidly as any information is available anytime and anywhere.
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The digital firm
• Two implications are:– Time shifting refers to business being conducted
continuously, 24x7, rather than in narrow "work day" time bands of 9 a.m. to 5 p.m.
– Space shifting means that work takes place in a global workshop, as well as within national boundaries.
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Strategic Business Objectives of IS
• Ideally the objectives of Information's systems are the Interdependence between a firm’s ability to:– Use information technology– Implement corporate strategies and achieve
corporate goals
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Strategic Business Objectives of IS
• Six Strategic Business objectives include: – Operational Excellence – New products, services and business models– Improve customer and supplier relations– Improved decision making– Competitive advantage– Survival
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Operational Excellence• Improvement of efficiency to attain higher profitability
• Information systems, technology an important tool in achieving greater efficiency and productivity
• Companies that pursue operational excellence provide consumers with products at the lowest total cost but the same quality.—operational excellence demands zero defects.
• Procedures for manufacturing pursue the highest level of efficiency, often using IT to track inventory and orders.
• A “Customer service” product pursues the highest level of convenience, with the goal of making every customer interaction easy, pleasant, quick, and accurate
• Wal-Mart, McDonalds, Dell, and Ryanair are examples of companies that pursue, arguably, operational excellence.
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Operational excellence example• Retaillink Walmart’s system used to tracks and store all
point of sales data for the company. • Walmart handles more than 1m customer transactions
every hour and stores of over 2.5 petabytes (1000 terabyte) of data
• A large amount of this data is available to Walmart supplier who can register for access to their companies information.
• This allows companies to accurately track sales, manage inventory, review forecasts, and perform a variety of granular analysis to improve their business.
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New products, services, and business models:
• Describes how company produces, delivers, and sells product or service to create wealth [ensure a competitive advantage]
• Information systems and technology are major enabling tools for “new products, services, business models”
• E.g. Apple’s iPod, iTunes and Netflix’s Internet-based DVD rentals
• Can you think of any other examples?
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Customer and supplier intimacy:
– Serving customers well leads to customers returning, which raises revenues and profits
• E.g. large hotels that use computers to track customer preferences and subsequently use to monitor and customize environment
– Intimacy with suppliers allows them to provide vital inputs, which lowers costs
• E.g. Wal Marts or that of most big retail firms’ information system which links sales records to contact manufacturer. Can assist in “just in time” production
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Improved decision-making• Without accurate information:
Managers must use forecasts, best guesses, luckLeads to:
Overproduction, underproduction of goods and services Misallocation of resources Poor response times
Poor outcomes raise costs, lose customers
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Competitive advantage
– Delivering better performance– Charging less for superior products– Responding to customers and suppliers in real time– Often achieved when firm achieves one of first four
advantages– E.g. Dell: Consistent profitability over 25 years; Dell
remains one of the most efficient producer of PCs in world.
– But Dell has lost some of its advantages to fast followers-- HP
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Survival
• Information technologies as necessity of business• May be:
• Industry-level changes, e.g. Citibank’s introduction of ATMs
• Governmental regulations requiring record-keeping
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Information Systems
• Information Technology: All hardware and software that a firm needs to achieve business objectives.
• Information System
– Set of interrelated components that collect, process, store and distribute information to support decision making, coordination & control of organizations.
– Also help in analyzing problems, visualize complex subjects and create new products.
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Information Systems
Information Systems contain information about:
• People
• Places
• Things
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Data, Information, and Systems
• Data vs. Information– Data
• A “given” or fact: a number, a statement, or a picture• The raw materials in the production of information
– Information• Data that have meaning within a context• Raw data or data that have been manipulated
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• Raw data – Time-consuming to read
– Difficult to understand
• Manipulated Data– Provides useful information
Data Manipulation
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Generating Information
• Raw data are processed in an IS to create final useful information– Process:
Manipulation of data
– Computer-based ISs: process data to produce information
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Information: Important Resource
• Information must be useful– Relevant– Complete– Accurate– Current– Cost effective
in business
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The Four Stages of Data Processing
• Input: Data are collected and entered into computer
• Data processing: Data are 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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Components of an Information System
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Computer Equipment for Information System
• Input devices: introduce data into the IS
• Processor: manipulates data through the IS
• Output devices: display information
• Storage devices: store data and information
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Information systems are more than computers
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Dimensions of Information Systems
• Computer Literacy: Knowledge of information technology
• Information Systems Literacy: Understanding:
– Organization
– Management
– Information Technology (technical)
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Organisational Dimension of information systems
– Hierarchy of authority, responsibility• Senior management• Middle management• Operational management• Knowledge workers• Data workers• Production or service workers
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Levels in an organisation
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Organisational Dimension of information systems (2)
– Separation of business functions• Sales and marketing• Human resources• Finance and accounting• Production and manufacturing)
– Unique business processes– Unique business culture– Organizational politics
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Management dimension of information systems
– Managers set organizational strategy for responding to business challenges
– In addition, managers must act creatively:• Creation of new products and services• Occasionally re-creating the organization
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Technology dimension of information systems
– Computer hardware and software– Data management technology– Networking and telecommunications technology
• Networks, the Internet, intranets and extranets, World Wide Web
– IT infrastructure: provides platform that system is built on
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Business Perspective on IS
• Investment in information Technology & systems must provide economic value to business
• Return on investment must be justified• RoI must be better than other investments in
other tangible assets• Increase productivity• Increase revenues• Strategic positioning• High stocks value
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Business Perspective on IS
• Creating VALUE for the firm• Decrease costs• Improve decision making• Improve execution of business processes• Provide solution to a problem or a challenge
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Business information value chain
• Raw data acquired and transformed through stages that add value to that information
• Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits
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Business information value chain
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Variation in Returns on Information Technology Investment
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• Investing in information technology does not guarantee good returns
• Considerable variation in the returns firms receive from systems investments
• Factors: – Adopting the right business model– Investing in complementary assets (organizational and
management capital)
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Complementary assets
• Assets required to derive value from a primary investment
• Firms supporting technology investments with investment in complementary assets receive superior returns
• E.g.: invest in technology and the people to make it work properly
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Complementary assets include– Organizational investments, e.g.
• Appropriate business model• Efficient business processes
– Managerial investments, e.g.• Incentives for management innovation• Teamwork and collaborative work environments
– Social investments, e.g.• The Internet and telecommunications infrastructure• Technology standards