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Learning Objectives • Relate functional areas and business processes to the value chain model. • Describe the support provided by IT and the Web to each of these functional areas: production/operations, marketing and sales, accounting and finance, and human resources management. • Describe the benefits & issues of integrating functional information systems.
The Age of Networked Intelligence • Not just networking of technology but it is about the networking of humans through technology
Digital Economy • Individuals and enterprises create wealth by applying knowledge, networked human intelligence, and effort to manufacturing, agriculture, and services
Knowledge Economy • Based on the application of human know how • Life long learner • “SMART” products • Economy added value will be created by brain not brawn • Mass Customized rather than mass-produced (Boutique Bakers/Garden scents)
One of the most successful models of e-Commerce is mass customization. the production of large quantities of customized items. It supplements or even replaces one of the most innovative concepts of the Industrial Revolution, mass production. Mass customization can be facilitated by the Web in four different approaches; Collaborative customizers Adaptive customizers Cosmetic customizers Transparent customizers Mass Customization
Pressures • Market • Global Economy and Strong Competition • Changing Nature of the Workforce • Powerful Customers • Technological • Technological innovation and obsolescence • Information Overload
Pressures (cont.) • Societal • Social Responsibility • Government Regulations • Government Deregulations • Shrinking budgets and subsidies • Ethical Issues
Organization Structure Need for new structures…..
Information Technology • Information technologies are flexible tools, constrained primarily by managers’ will to use them, expectations about their roles, and applications choices. Cash p.267
Organization Structure • Division of Labor • Who does what? • Division of Decision Rights • Who should make which decision? • Coordination Mechanisms • Organizational Boundaries • Informal Structures
Virtual Corporations • AVirtual Corporation (VC)is an organization composed of several business partners sharing costs and resources for the purpose of producing a product or service. • According to Goldman et al. (1995), permanent virtual corporations are designed to do the following: • Create or assemble productive resources rapidly. • Create or assemble productive resources frequently and concurrently. • Create or assemble a broad range of productive resources.
Virtual Corporations (cont.) • In a VC, the resources of the business partners remain in their original locations but are integrated. • In order to function, VCs rely on the following forms of IT; • Communication/ collaboration among dispersed business partners • e.g., e-mail, desktop videoconferencing, screen-sharing, etc. • EDI and EFT • Intelligent agents • Modern database technologies and networking • Intranet/Internet applications
Empowerment Using IT • Empowermentis the vesting of decision-making or approval authority in employees where, traditionally, such authority was a managerial prerogative. • Empowerment can be enhanced through IT. • Empowered employees are expected to perform better. • In addition to empowering employees, companies are empowering their customers, suppliers, and other business partners. • E.g. Federal Express uses the Internet to empower its customers.
Strategic Information Planning • To accomplish business/IT alignment, the organization must execute the following (same for e-business): • Set the IT mission. • Assess the environment. • Assess existing systems’ availabilities and capabilities. • Assess organizational objectives and strategies. • Set IT objectives, strategies, and policies. • Assess the potential impacts of IT.
Why Organizations need Information Systems • Meeting Global Challenges • Capturing opportunities in the Market Place • Supporting Corporate Strategy • Linking Departments Whose Functions are different • Enhancing Worker Productivity • Increasing Quality of Goods and Services
IT Era’s • Data Processing (DP) • Micro Era • Network Era • WAN Network Environment • Client-Server • Thin Client • WAP
Human Resources Systems Quality Control Information Systems Geographic Information Systems Financial and Accounting Systems Manufacturing Information Systems Customer Marketing Information Systems(CRM)
Customer relationship management (CRM)is an approach that recognizes that customers are the core of the business and that the company’s success depends on effectively managing relationships with them. Customer serviceis a series of activities designed to enhance the level of customer satisfaction. Relationship marketing is the “overt attempt of exchange partners to build a long-term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” (Mowen & Minor, 1998). E-Service iscustomer service that is performed on the Web, sometimes automatically. Customer Relationship Management
Providing Search and Comparison Capabilities. Providing Free Products and Services. Providing Technical and Other Information and Service. Allowing Customers to Order Customized Products and Services Online. Letting Customers Track Accounts or Order Status Customer Service on the Web
Personalized Web Pages FAQs Tracking Tools Chat Rooms E-mail and Automated Response Help Desks and Call Centers Troubleshooting Tools Tools for Customer Service
Other Information Systems • Strategic • National Semiconductor – “faster & better” decisions • Global – Levi’s
Strategic Information Systems • Cost leadership • Differentiation • Supports strategic changes – like reengineering • Growth • Innovation • Provide business intelligence by collecting and analyzing information • Improve internal efficiency • Customer-oriented approaches
IT Planning & BPR Nuts and Bolts…….
Technology Issues • Transition to network computing • Move from Legacy systems to client/server • How much infrastructure? • Centralization vs decentralization – finding the balance • Role of end user
Dell Case Study How Dell Reengineered its Supply Chain
Lessons from the Case • By introducing a new business model , one can change the manner in which business is done. • To implement this model on a large scale, one needs to build superb supply chain management. • Improved communications and customer service, which are part of Dell’s CRM program, are the cornerstones of its success. • Dell was using e-Commerce with its business partners.
Key Planning Issues • Align IT plan with organizational business plan • IT architecture that promotes and networks the integration of users, applications, and databases • Allocation of IS and operational resources among competing applications • Completing projects on time and within budget
Infrastructure Considerations • Broadbent et al. (1996) found the following four infrastructure relationships; • Industry—manufacturing firms use less IT infrastructure services than retail or financial firms. • Market volatility—firms that need to change products quickly use more IT infrastructure services. • Business unit synergy—firms that emphasize synergies (e.g., cross-selling) use more IT infrastructure services. • Strategy and planning—firms that integrate IT and organizational planning, use more IT infrastructure services.
CSF’s Prime Source • Structure of Particular Industry • Competitive Strategy, industry position, and geographical location • Environmental Factors • Temporal Factors The critical success factors (CSF) approach was developed to help identify the information needs of managers
Critical Success Factors(CSF’s – Pg 346-347) • What industry objectives are central to your organization? • What are the critical factors that are essential to meeting these objectives? • What decisions or actions are key to these critical factors? • What information systems can supply these measures?
Reengineering…. BPR, Process Innovation, ERP, Mass Customization, Networked Organization, Empowerment, Teams, Virtual Corporations, TQM, JIT, POM, BPM, CRM
Reengineering the Corporation • Written - 1993 • Michael Hammer • One of 1996 most influential people in the U.S. • Time Magazine • July 17,1996 • James Champy
What is Reengineering? • “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, • contemporary measures or performance, such as cost, quality, service, and speed” • p. 32
Business Process Reengineering • Initially, attention was given to a complete restructuring of organizations. • Later, the concept was changed due to failures of BPR projects and the emergence of Web-based applications. • Today, BPR can focus on anything from the complete restructuring of an organization to the redesigning of individual processes. • Major objective of BPR = Information Integration.
Increase product by an order of magnitude Examine process Vision Increase Profits Benefit from better product Needs are met Tendency to return Loyalty Impacts Company Customers Employees • Teams • Less Workers - More Work • Empowered • Layoffs
Why Reengineer • The 3 C’s • Customers • Competition • Change • Nothing is Constant or Predictable • Change is the only constant
To reengineer a company is to take a journey from the familiar into the unknown. The journey has to begin somewhere and with someone. Where and with whom? • P. 101
Keys • Leaders • Staff Empowerment • Broader Scope • Knowledge / Skills • Tasks to Process • Redesign of Systems • Information Technology • Community
The 3 R’s • Redesign • Cross-function approach • Retool • Information Tools • Reorchestrate • Organization changes
Problems • Fix vs. Change • Focus • Ignore • Quit • Scope • HR / Unions • Success Rate
BPR Failures • During the 1990s there were just as many cases of BPR failures as there were success stories. • A survey conducted by the PROSCI organization (prosci.com) indicates a failure rate of 50 to 80%. • Some of the reasons cited for failures are: • high risk • inappropriate change management • failure to plan for internal politics • high cost of retooling • lack of participation and leadership • inflexible software • lack of motivation
Bell Atlantic’s Experience • The difference is that in a compliance mode I do what I must do because my boss tells me I must do it. In a commitment mode, I understand what the corporation is trying to achieve and how we’re going to achieve it, and I will do whatever it takes to make that happen, including changing the way I do my job if that is what is required • p. 196/197
BPR • No longer a need to destroy everything - start from scratch • Instead - Flexible approach that can be executed by proven methodologies and principles. Hammer and Stanton & Champy 
Process Innovation Encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions – order-of-magnitude improvements Davenport (1993)
Formal Highly Structured Manage Control Direct Employee a cost Information management owned Risk avoidance Individual contributions Networked Organization Classical/Hierarchical Networked Organ. • Informal • Loosely Structured • Delegate/lead • Ownership/participation • Empower • Employees an asset • Information shared-ownership • Risk management • Team contributions
CHANGE • “It is an educational and communications campaign” • p.148