06. Information Systems (IS) in Management & Strategic Information Systems (SIS)

Rev: Feb, 2013

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

Contents1 Information Systems in Management

1) The role of IS in Management

2) Hierarchy Level of IS in Management

2 Strategic Information Systems

1) Introduction

2) Competitive Strategy & IT

3) Evaluation of SIS

3 Case Study

3

3-Axis MSS Model

Model

Data

Intelligence

IS Type = f(m, d, i)

a?

c?

b?

Ex)

TPS = f(0.1, 0.9, 0)DSS = f(0.5, 0.3, 0.2)

Ex)

TPS = f(0.1, 0.9, 0)DSS = f(0.5, 0.3, 0.2)

1. Information Systems in Management1) The role of IS in Management

4

The view of Information Systems

View Point 1

Data Information Decision Aids Knowledge

StatisticalAnalysis

MathAnalysis

Reasoning

View Point 2

Extreme top

Top

Middlelow

Extreme low

EIS/ESS

DSS

IPS

TPS

OAS

ERP

View Point 3

Strategic Value

IS Expansion

H

LL H

?

?

1. Information Systems in Management1) The role of IS in Management

5

Role of IS

View Point 4

Helper A Function

Management

Marketing

Financing

Accounting

IS

IS

ISManagement

IS

Marketing Accounting

Financing

Controller

IS

MarketingAccounting

Financing

Melting Pot

IS

MarketingAccounting

Financing

All Functions are melted

1. Information Systems in Management1) The role of IS in Management

6

Management Hierarchy Level (1/2)

Extremetop

Top

Middle

low

Extreme low

Types ofmanagement

Political strategic

Strategic

Tactical

Operational

Clerical

Problem typesto be dealt with

Unstructured

Semi – Structured

and Structured

Structured

Management Trian-gle

1. Information Systems in Management2) Hierarchy Level of IS in Management

7

Management Hierarchy Level (2/2)

Use of data&

Information

Quality

of Data

Types

of ISRoles of IS

Strategic

Impor-tance

Political decision &

strategic

High-degree

decisional aidsEIS/ESS

Controller

Strategic driver

Very

important

(Strong SIS)

Little

importance

(Weak SIS)

Mathematical anal-ysis of information

Decisional aids DSS Controller

Statistical

Analysis of dataInformation

IPS

MIS(s)Function

Retrieval & use for

Operational pur-pose

Raw data

TPS

(EDPS)

Helper to

Each function

Data processing

OASAssistant to

helper to each function

1. Information Systems in Management2) Hierarchy Level of IS in Management

Extremetop

Top

Middle

low

Extreme low

Management Triangle

8

Strategic IT

■ 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 that uses IT to

help an organization…– Gain a competitive advantage– Reduce a competitive disadvantage– Or meet other strategic enterprise objectives

2. Strategic Information System1) Introduction

Information System (IS) Strategic Information System (SIS)

Definition• Support activities to the

business• Integral and necessary part of the

business

Characteris-tics

• Mechanizes operations for better efficiency, control, and effectiveness

• Simply provides sufficient dependable information

• Doesn’t increase corporate profitability in itself

• Directly influences all aspects of mar-ketplace profitability such as market share and earnings

• Directly affects the competitive stance of the organization

9

Paradigm ShiftGlobe-driven Information-driven Customer-driven Technology-driven

MIT(Management Innovation Technology)

SM(Super Set)

SIS(Subset)

OAS TPS (EDPS) IPS & MIS DSS EIS & ESS

KM CRM MOTSAERP & BPREC

Dramatic Profit Competitive Advantage

2. Strategic Information System1) Introduction

Overview of SIS

10

Strategy Tree (1/2)

Information(IT, IS)

Automation

Innovation

■ Use of Information

■ Automation

■ Strategic Use of Information

Automation

Work Automation

Manufacturing Automa-tion

Strategic Information Sys-tem(SIS)

Non-strategic Information System (NSIS)

StrategicUse of Information

(IT, IS)

Success

Failure

2. Strategic Information System1) Introduction

11

Strategy Tree (2/2)

Strategic Management (SM)

Non-strategic Management (NSM)

StrategicManagement

Success

Failure

■ Strategic Management

■ Information Strategy Tree

Information

Automation

Innovation

Work Automa-tion

Manufacturing Automation

NSIS

SIS SM

NSM

2. Strategic Information System1) Introduction

12

Competitive Strategies (1/2)

■ Using Competitive Strategies– These strategies are not mutually exclusive• Organizations use one, some, or all• A given activity could fall into one or more categories

– Not everything innovative serves to differentiate one organization from another• Likewise, not everything that differentiates organizations is innovative

Competitive Forces and Strategies

2. Strategic Information System2) Competitive Strategy & IT

• Businesses can develop com-petitive strategies to counter the actions of the competitive forces they confront in the marketplace.

13

Competitive Strategies (2/2)

■ Cost Leadership Strategy– Reducing their costs or increasing the

costs of competitors

■ Differentiation Strategy– Developing ways to differentiate a firm’s

products and services from those of its competitors

■ Innovation Strategy– Developing unique products and services

or entering unique markets or market inches

■ Growth Strategy– Expanding a company’s capacity to pro-

duce goods and services, expanding into global markets, diversifying into new products and services, or integrating into related products and services

■ Alliance Strategy– Establishing new business linkages and al-

liances with customers, suppliers, com-petitors, consultants, and other companies

2. Strategic Information System2) Competitive Strategy & IT

Five Competitive Strategies

Strategies

Growth

Cost Leader-ship

Differentia-tion

AllianceInnovation

14

Ways to Implement Basic Strategies

Basic Strategies in the Business Use of Information Technology

Lower Costs▶ Use IT to substantially reduce the cost of business processes.▶ Use IT to lower the costs of customers or suppliers

Differenti-ate

▶ Develop new IT features to differentiate products and services.▶ Use IT features to reduce the differentiation advantages of competitors.▶ Use IT features to focus products and services at selected market niches.

Innovate

▶ Create new products and services that include IT components.▶ Develop unique new markets or market niches with the help of IT.▶ Make radical changes to business processes with IT that dramatically cut costs;

improve quality, efficiency, or customer service; or shorten time to market.

Promote Growth

▶ Use IT to manage regional and global business expansion.▶ Use IT to diversify and integrate into other products and services.

Develop Al-liances

▶ Use IT to create virtual organizations of business partners.▶ Develop interenterprise information systems linked by the Internet and extranets that

support strategic business relationships with customers, suppliers, subcontractors, and others.

Other Competitive Strategies Lock in customers and suppliers Create switching costs Raise barriers to entry Build strategic IT capabilities Leverage investment in IT

2. Strategic Information System2) Competitive Strategy & IT

15

Evaluation of SIS

■ When you evaluate a SIS…

1. Process automation or innovation

2. If innovation, which Hammer’s principle?

3. Which competing forces to e affected

4. Value chain activities to be reinforced

5. Type of IS

2. Strategic Information System3) Evaluation of SIS

16

Note

■ MIT PPT material (SIS)– http

://ocw.mit.edu/courses/sloan-school-of-management/15-565j-integrating-esystems-global-information-systems-spring-2002/lecture-notes/lecture02.pdf

17

Reference

■ O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 1

■ O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 2

■ Euiho Suh, “Information & Management (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ Euiho Suh, “Role of Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ Euiho Suh, “Strategic Information Systems (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)