1. Purposes of Information Systems Chapter 2

2. Learning Objectives • Know the principles of competitive advantage. • Know the characteristics of decision making and problem solving. • Recognize that different information systems are needed to solve different problem definitions. • Understand how information systems facilitate problem solving. • Understand how information systems create competitive advantage.

3. Why Firms Seek Competitive Advantage (Porter’s Five-Force Model): • Rivalry among existing competitors • Threat of new entrants • Threat of substitute product and services • Bargaining power of buyers • Bargaining power of suppliers

4. Information Systems for Competitive Advantage • Businesses continually seek to establish competitive advantage in the marketplace. • There are eight principles: • The first three principles concern products. • The second three principles concern the creation of barriers. • The last two principles concern establishing alliances and reducing costs.

5. Organizational Change • Organizational change deals with how organizations plan for, implement and handle change. Overcoming resistance to change can be the hardest part of bringing information systems into a business. Too many computer systems and new technologies have failed because managers and employees were not prepared for change. • A change model identifies the phases of change and the best way to implement it: • Unfreezing is the process of removing old habits and creating a climate receptive to change • Moving is the process of learning new work methods, behaviors and systems • Refreezing involves reinforcing changes to make the new process second nature, accepted and part of the job

6. Information Systems for Problem Solving • Information systems can be used to solve problems. • Problem definition • A problem is a perceived difference between what is and what is not. • A problem is a perception. • A good problem definition defines the differences between what is and what ought to be by describing both the current and desired situations. • Different problem definitions require the development of different information systems. • All personnel in the organization must have a clear understanding of which definition of the problem the information system will address.

7. Decision Making and Problem Solving • Problem solving is the most critical activity a business organization undertakes. Problem solving begins with decision making. • In the intelligence stage, potential problems and /or opportunities are identified and defined • In the designstage, alternative solutions to the problem are developed • In the choicestage, a course of action is selected • In the implementationstage, action is taken to put the solution into effect • In the monitoringstage, the implementation of the solution is evaluated to determine if the anticipated results were achieved and modify the process

8. The Decision Process • Two decision processes (method by which a decision is to be made) are structured and unstructured. • Structured decision process is one for which there is an understood and accepted method for making the decision. • Unstructured process is one for which there is no agreed on decision making process. • The terms structured and unstructured refers to the decision process-not the underlying subject.

9. Relationship of Decision Level and Decision Type

10. Optimization, Satisficing, and Heuristic • Optimizing is finding the best solution and is usually best fit for problems that can be modeled mathematically with a low degree of estimation risk. For example, find how many products an organization should produce to meet a profit goal. • Satisficing is finding a good, but not necessarily the best, solution. Satisficing does not look at all possible solutions, but at those that are likely to give good results. Satisficing is a good decision method because it is sometimes too expensive to analyze every alternative to get the best solution. A satisficing example is when you have to select a location for a new plant. • Heuristics are guidelines or procedures that usually find a good solution by using “rules of thumb”.

11. Different Types of Information Systems for Different Types of Decisions • Automated information systems are those by which the computer hardware and program components do most of the work. • Humans start the programs and use the results. • Augmentation information systems are those in which humans do the bulk of the work. • These systems augment, support, or supplement the work done by People (email, instant messaging, video-conferencing, etc) to aid in decision making.

12. How Decision Level, Decision Type and IS Type Are Related

13. Information Systems for Decision Making • Decision making in organizations is varied and complex. • Decisions occur at three levels in organizations (decision levels): • Operational decisions concern day-to-day activities. • Information systems that support operational decision making are called transaction processing systems (TPS). • Managerial decisions concern the allocation and utilization of resources. • Information systems that support managerial decision making are called management information systems (MIS). • Strategic decision making concern broader-scope organizational issues. • Information systems that support strategic decision making are called executive information systems (EIS).

14. Knowledge Management System • A knowledge management system (KMS) is an information system for storing and retrieving organizational knowledge.This knowledge can be in the form of data, documents, or employee know-how. • KMS goal is to make the organization knowledge available to • Employees • Vendors • Customers • Investors • Press and who else who needs the knowledge

15. Summary • Organizations develop and use information systems to gain competitive advantage, to solve problems, and to assist in decision making • Eight principles of competitive advantage. • A problem is a perceived difference between what is and what ought to be. • Decisions vary according to whether a structured or unstructured process is used to make them. • Automated information systems are those in which the computer and program side of the five components do most of the work. • Augmentation information systems are those in which humans do most of the work. • Another way to consider information systems and decision making is to consider the steps of the decision process. • Different types of information systemsare used for different steps of the decision process. • Decisions can be made at the operational (TPS), managerial (MIS), and strategic (EIS) levels.

16. Video • Interview Question: According to your survey, you like sociable environments, but will follow-through on tasks that are important. How do you prioritize and keep on track toward your objectives? How do you manage procrastination and talkative co-workers? • How to evaluate the responses to this question? PeopleKeys® will compare the applicants response to a benchmark set by the actual job description - then once the interview process is complete - PeopleKeys® will tell you which applicant(s) are best suited for the position. • PeopleKeys is a tool for understanding the strengths and weaknesses of individuals based on personality traits that can be used for hiring, training, retention, and much more.

17. Guides • Ethics Guide: • Do you see evidence of a digital divide in your campus, hometown, neighborhood? What solutions do you offer to reduce the digital divide? • Problem Solving Guide: • What is the difference between egocentric and empathetic thinking? • How does empathetic thinking relate to problem definition? • In business, is empathetic thinking smart? • Reflections Guide: • Summarize the efforts you have taken to build an employment record that will lead to job offers after graduation. • Describe one way in which you have a competitive advantage over your classmates. • How can you use student alliances to obtain a job?