Management Information Systems

1. Management Information Systems 5013

2. Agenda Your instructor Course outline Q&A about the course Electronic Resources Online journal and indexes Break 5. Lectures The Network Economy Foundations of IS in business Competing with IS Telecommunications and networks.

3. Your Instructor What would you like to know about me? How far back?

4. Research Interests MIS: Technology Adoption Intelligent Agents Social Issues Knowledge Management, Intellectual Capital and Innovation

5. Course Outline Course outline

6. E-Journals and Databases http://library.lakeheadu.ca IEEE Explore � technical issues, ABI/Inform JSTOR � Psychology-related and MIS Science Direct Not listed in the list of indexes To access Science Direct Go to E-Journals �Computers in Human Behavior� �Access fulltext Science Direct� Search the index, not only this journal Communications of the ACM

7. The Network Economy

8. The New Economy A controversial issue The importance of knowledge High tech often replaces human communication and brainpower Electronic transactions

9. The Network Economy The advent was foreseen in 1969 by Peter Drucker Teacher, writer, consultant, thinker, and lecturer on the contemporary organization Wall Street Journal editor and frequent HBR contributor

10. The Network Economy Connected World Increasing Web traffic Novice users acquire computes New web participants Web bots, intelligent agents, mobile objects, etc. Moore�s Law Gilder�s Law Metcalfe's Law

11. The Network Economy The observation made in 1965 by Gordon Moore, co-founder of Intel. The number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented. Moore predicted that this trend would continue for the foreseeable future. Currently, it is 18 - 24 months. Most experts, including Moore himself, expect Moore's Law to hold for at least another two decades.

12. The Network Economy Gilder�s Law The bandwidth of both wired and wireless networks has been continuously increasing Follows the Gilder�s Law Bandwidth grows three times as fast as the CPU speed This trend facilitates the development of various innovative technologies, including wireless Internet access and mobile portals

13. The Network Economy Exponential Value As the number of nodes increases linearly, the value of the network grows exponentially The network�s value is derived from plentitude E.g., as volume of online transactions increases, the cost of every transaction diminishes

14. The Network Economy Exponential Value Metcalfe's Law Robert Metcalfe founded 3Com Corporation and designed the Ethernet protocol for computer networks Metcalfe's Law states that the usefulness, or utility, of a network equals the square of the number of users N*N � N

15. The Network Economy Lifespan of Innovation Ideas spread really fast Hard to achieve a sustainable competitive advantage Continuous innovation

16. The Network Economy Increasing Returns After the dot-com crash, some individuals have become �dot-com averse� Under investing vs. over investing E.g., continuous investing in a market leader will make it stronger and weaken the competitors

17. The Network Economy Decreasing Prices Consumers may count on superior quality for less price over time Scientists find ways to get more out of less material Computers, cars, electronic devices, computer memory, etc.

18. The Network Economy Information is the king! The value of accurate and timely information increases If you have perfect information, the best deal is guaranteed Technology may empower the user

19. The Network Economy Information is the king!

20. The Network Economy Information is the king! Shopping bots � price comparison engines Perfect information Try to search for one of course textbooks E-vendors tend to commoditize offerings Name, delivery options, shipping time Single free competition market with zero long-term profit � Price wars E-vendor bots

21. The Network Economy People expect free Freeware or at least trial versions of software programs are taken for granted Get a product for free and pay for service or support E.g., Java language

22. The Network Economy High Dependency In a linked economy, the fate of an organization depends on other companies in the supply value chain, their competitors, and the external environment Organizations have to become highly adaptive

23. The Network Economy High Rate of Displacement The agricultural era � industrial era People have to change professions Companies have to change product lines and restructure

24. The Network Economy Summary Connected world Exponential value Lifespan of innovation Increasing returns Decreasing prices Value of information People expect free Dependency Displacement

25. Foundations of Information Systems in Business Topic

26. Understand the concept of a system Explain why IS knowledge is important Provide examples of the components of real world systems and information systems Explain classification of IS Become familiar with IT careers Learning Objectives

27. Foundation Concepts Why study information systems and information technology? Vital component of successful businesses Helps businesses expand and compete Improves efficiency and effectiveness of business processes Facilitates managerial decision making and workgroup collaboration

28. Why Study IS? Does the area of MIS relate to common sense so that there is no point studying it? High rate of MIS projects failures Most MIS projects don�t meet the deadlines and exceed the budget Can we imagine an organization without an information system? A great degree of expertise is required to implement IS projects or simply utilize the systems

29. System Concepts System Concepts 1. What�s a System? 2. What�s an Information System? 3. Components of an IS 4. Information System Activities

30. What is a System? A system is� A set of interrelated components With a clearly defined boundary Working together To achieve a common set of objectives By accepting inputs and producing outputs In an organized transformation process

31. Basic Functions of a System Input Capturing and assembling elements that enter the system to be processed Processing Transformation process that converts input into output Output Transferring transformed elements to their ultimate destination

32. Cybernetic System All systems have input, processing, and output A cybernetic system, a self-monitoring, self-regulating system, adds feedback and control: Feedback is data about the performance of a system Control involves monitoring and evaluating feedback to determine whether a system is moving toward the achievement of its goal

33. Add Feedback and Control Loops Feedback is self-monitoring Feedback is data about the performance of a system. Control is self-regulating Control involves monitoring and evaluating feedback to determine whether a system is moving toward the achievement of its goals. The control function then makes necessary adjustments to a system's input and processing components to ensure that it produces proper output.

34. A Cybernetic System A home temperature control system

35. A Cybernetic System Company sales (a company is a system) decreased Information (feedback) was sent to the sales manager The sales manager acts (controls): reassigns salespersons, hires new salespersons, fires, changes reward structure, etc.

36. General Systems Theory Interdisciplinary science that studies structures and properties of systems Was officially established as a scientific field in 1950s The concepts trace back to 1600s It is believed that a system consists of interacting components or groups of components that form a new whole

37. General Systems Theory

38. Other System Characteristics A system exists and functions in an environment containing other systems Subsystem � a component of a larger system A larger is referred to as �environment� Systems that share the same environment may be connected to one another through a shared boundary, or interface Open versus closed system Open � interacts with other systems Adaptive system � a system that changes itself

39. Characteristics of Open Systems Input /Output Model: All systems transfer inputs into outputs. The system is viewed as a transformation process in a dynamic interaction with its environment. Feedback and Control: The feedback of information regarding performance is used to adjust and control performance. Interdependence: A system is composed of interrelated parts or elements

40. Characteristics of Open Systems (Conti..) Holism: The system is a whole, not merely the sum of its parts, and its performance should be viewed as an integrated system. Goal seeking: Interaction between elements results in some final state or goal. Steady State: The notion that systems are goal seeking implies that they are adaptive and self-regulating. It seeks a state of dynamic equilibrium.

41. Characteristics of Open Systems (Conti..) Differentiation: In complex systems, units perform specialized functions. Open systems tend to move towards increased differentiation. Equifinality: In complex systems, an initial state may result in several possible final states, and a similar final states may be achieved from many different initial states. Hierarchy: One system contains several other systems within it and is also a part of a large super-systems.

42. Characteristics of Open Systems (Conti..) Entropy: Open systems exchange information, energy, or material with their environment. Every transformation process involves the use of energy and resources. The tendency towards entropy is a movement towards disorder and eventually termination of functioning. To keep a system operating there must be an infusion of energy and resources.

43. A Business as a System

44. What is an Information System? An organized combination of� People Hardware and software Communication networks Data resources Policies and procedures This system� Stores, retrieves, transforms, and disseminates information in an organization

45. Information Technologies Information Systems All the components and resources necessary to deliver information and functions to the organization Could be paper based Information Technologies Hardware, software, networking, data management Our focus will be on computer-based information systems (CBIS)

46. Components of an IS

47. Information System Resources People Resources Specialists � system analysts, developers, tech support End users Many of them are knowledge workers �those who create, use and disseminate information and knowledge Hardware Resources Machines � computers or other equipment Peripherals � devices such as mouse, keyboard, etc. Media � tangible objects on which data are recorded or provided to users

48. Information System Resources Software Resources Programs Operating instructions that control computer hardware System software � Operating system, MS Windows or Unix Application software � programs employed by end users, e.g., MS Office Procedures Operating instructions for users and support people E.g., create a backup at the end of each day, software installation instructions, email usage rules

49. Information System Resources Data Resources Product descriptions, customer records, employee files, inventory databases Valuable organizational resources Data vs. Information Data are raw unprocessed facts Information is data converted to be useful to end users Information is data that are Aggregated, manipulated and organized Its content is analyzed and evaluated It is placed in a proper context for a human user

50. Data Versus Information

51. Data Versus Information Data resources in IS are typically organized, stored, and accessed through Databases that hold processed and organized data. A report that is generated from the database is information Knowledge bases that hold knowledge such as facts, rules, and case examples about successes and failures

52. Information System Resources Network Resources Communications media � twisted-pair wire, coaxial cable, microwave, cellular or other wireless technologies Network Infrastructure Hardware Software Data technologies That are needed to support the operation and use of networks E.g., communications processors, network access and control software

53. Information System Resources Information Resources Management reports and business documents using text and graphics displays, audio responses, and paper forms

54. IS Activities Input of data resources Data entry activities, e.g., optical scanning of bar-codes on tags Processing of data into information Calculations, comparisons, sorting, classifying, summarizing, and so on, e.g., calculating employee pay, taxes, parking deduction, etc. Output of information products Messages, reports, forms, graphic images, e.g., producing reports about sales performance

55. IS Activities Storage of data resources During storage, data are retained in an organized manner for later use Databases Control of system performance Monitoring and evaluating feedback about input, processing, output and storage Adjustments to the processes may be made E.g., total is different from subtotals � correct some procedures

56. Recognizing Information Systems Business professionals should be able to look at an information system and identify� The people, hardware, software, data, and network resources they use The type of information products they produce The way they perform input, processing, output, storage, and control activities

57. What Should Business Professionals Know?

58. Fundamental Roles of IS in Business

59. Trends in Information Systems

60. Types of Information Systems

61. Types of Information Systems Operations Support Systems Efficiently process business transactions Control industrial processes Support communication and collaboration Update corporate databases Management Support Systems Provide information as reports and displays Give direct computer support to managers during decision-making

62. Operations Support Systems What do they do? Efficiently process business transactions Control industrial processes Support communications and collaboration Update corporate databases

63. Types of Operations Support Systems Transaction Processing Systems Record and process business transactions Examples: sales processing, inventory systems, accounting systems Process Control Systems Monitor and control physical processes Example: using sensors to monitor chemical processes in a petroleum refinery Enterprise Collaboration Systems Enhance team and workgroup communication Examples: email, video conferencing

64. Two Ways to Process Transactions Batch Processing Accumulate transactions over time and process periodically Example: a bank processes all checks received in a batch at night Online Processing Process transactions immediately Example: a bank processes an ATM withdrawal immediately

65. Management Support Systems What do they do? Provide information and support for effective decision making by managers Management information systems Decision support systems Executive information systems

66. Types of Management Support Systems Management Information Systems (MIS) Reports and displays Example: daily sales analysis reports Decision Support Systems (DSS) Interactive and ad hoc support Example: a what-if analysis to determine where to spend advertising dollars Executive Information Systems (EIS) Critical information for executives and managers Example: easy access to actions of competitors

67. Other Information Systems Expert Systems Provide expert advice Example: credit application advisor Knowledge Management Systems Support creation, organization, and dissemination of business knowledge throughout company Example: intranet access to best business practices

68. Other Information Systems Strategic Information Systems Help get a strategic advantage over competitors Support operations that provide a firm with strategic product and services for competitive advantage Examples: shipment tracking, e-commerce Web systems Functional Business Systems Focus on operational and managerial applications of basic business functions Examples: accounting, finance, or marketing

69. Measuring IT Success Efficiency Minimize cost, time, and use of information resources Effectiveness Support business strategies Enable business processes Enhance organizational structure and culture Increase customer and business value

70. Developing IS Solutions IS development cycle

71. IT Careers Economic downturns have affected all job sectors, including IT Rising labor costs are pushing jobs to India, the Middle East, and Asia-Pacific countries However, IT employment opportunities are strong, with new jobs emerging daily Shortages of IT personnel are frequent The long-term job outlook is positive and exciting

72. Competing with IT Competing with IT

73. Basic competitive strategies Strategic uses of IT BPR Virtual company Agile organization Learning Objectives

74. Technology is no longer an afterthought in business strategy, but the cause and driver IT can change the way businesses compete A strategic information system is any information system (TPS, DSS, MIS, etc.) that uses IT to help an organization� Gain a competitive advantage Reduce a competitive disadvantage Or meet other strategic enterprise objectives Strategic IT

76. Competitive Forces and Strategies

77. Cost Leadership Become low-cost producers Help suppliers or customers reduce costs E.g., WestJet � online ticketing for cost reduction Reduce inventory (JIT) Reduce manpower costs per sale Reduce manufacturing costs (process control) Increase cost to competitors Five Competitive Strategies

78. Differentiation Strategy Differentiate a firm�s products from its competitors� May allow you to reduce a competitor�s differentiation advantage Focus on a particular segment or niche of market Example: Nike uses online customer design ABE Books � online sales to differentiate from other small retailers Five Competitive Strategies

79. Innovation Strategy New ways of doing business Unique products or services that include IT New ways to better serve customers Improve quality or efficiency Reduce time to market New distribution models Schwab � online discount trading to become a market leader FedEx � online package tracking to become a market leader and to lock-in the customers Gov�t of Canada � eGovernment � self-service Air Canada vs. WestJet � online booking Competitive Strategies (continued)

80. Growth Strategy Expand company�s capacity to produce Expand into global markets Diversify into new products or services Example: Wal-Mart�s merchandise ordering via global satellite tracking Competitive Strategies (continued)

81. Alliance Strategy Establish linkages and alliances with customers, suppliers, competitors, consultants, and other companies Includes mergers, acquisitions, joint ventures, virtual companies Use IT to create virtual organizations of business partners Example: Wal-Mart uses automatic inventory replenishment by supplier Ford and GM example � online marketplace alliance Competitive Strategies (continued)

82. These strategies are not mutually exclusive Organizations use one, some, or all A given activity could fall into one or more categories of competitive strategy Not everything innovative serves to differentiate one organization from another Likewise, not everything that differentiates organizations is necessarily innovative Using Competitive Strategies

83. Lock in Customers and Suppliers Deter them from switching to competitors Ideally, businesses should bring value into your relationship Contracts Soft-locks The Brick example Online passwords � Pros and Cons First to offer the service � why switch later? Amazon one click purchasing Other Competitive Strategies

84. Build in Switching Costs Make customers and suppliers dependent on the use of innovative IS Proprietary software applications Sell to GE and Wal-Mart � supplier switching costs Potential negative consequences Erect Barriers to Entry Discourage or delay other companies from entering the market Increase the technology or investment needed to enter E.g., develop a complex AI-based system Other Competitive Strategies

85. Leverage Investment in IT Develop products and service that would not be possible without a strong IT capability E.g., the development of intranets and extranets enables companies to leverage their previous investment in IT infrastructure (PC, databases, networks, software, etc) Implication: when investing in new IT, analyze its future areas of application, e.g., Is it going to be compatible with other major technologies in future? Other Competitive Strategies

86. View the firm as a chain of basic activities that add value to its products and services Primary processes directly relate to manufacturing or delivering products Support processes help support the day-to-day running of the firm and indirectly contribute to products or services Use the value chain to highlight where competitive strategies will add the most value The Value Chain and Strategic IS

87. Using IS in the Value Chain

88. Strategic Uses Of Information Technology IT may be viewed as a major competitive differentiator. In this case, IT may be used for: Business Process Reengineering (BPR) Agile organization The virtual company Building knowledge-creating companies

89. Called BRP or simply Reengineering Fundamental rethinking and radical redesign of business processes Seeks to achieve improvements in cost, quality, speed, and service Potential payback is high, but so is risk of disruption and failure Organizational redesign approaches are an important enabler of reengineering Includes use of IT, process teams, case managers Reengineering Business Processes

90. BPR Versus Business Improvement

91. IT plays a major role in reengineering most business processes Can substantially increase process efficiencies Improves communication Facilitates collaboration The Role of Information Technology

92. Agility is the ability to prosper In rapidly changing, continually fragmenting global markets By selling high-quality, high-performance, customer-configured products and services By using Internet technologies An agile company profits in spite of Broad product ranges Short model lifetimes Individualized products Arbitrary lot sizes Becoming an Agile Company

93. An agile company� Presents products as solutions to customers� problems Cooperates with customers, suppliers and competitors Brings products to market as quickly and cost-effectively as possible Organizes to thrive on change and uncertainty Leverages the impact of its people and the knowledge they possess Strategies for Agility

94. A virtual company uses IT to link� People Organizations Assets Ideas Inter-enterprise information systems link� Customers Suppliers Subcontractors Competitors Creating a Virtual Company

95. Virtual Corporations

96. A Virtual Company