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Reading notes for chapter 3 in the textbook.

Read Section 3.1 leisurely. It is on the organizations and the informationsystems. You are probably familiar with the organization theory .Pay

attention to the technical and behavioral definitions of organizations as

well as bureaucracy, structural characteristics of organizations, standard

operating procedures and organizational culture.

Section 3.2 is on the changing role of information systems in the

organization and is interesting to read how information systems leads to

automation, decreases transaction costs and lays foundations for virtual

organizations. Note the definitions of end users and CIO.

Section 3.3 is on decision-making, perhaps another familiar topic for

you. Pay attention to strategic decision making, structured and

unstructured decisions, rational model of decision making .It would be

interesting to read individual models of decision-making and

organizational models of decision-making.

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Reading notes for chapter 3 in the textbook - Continued

Section 3.4 is on the strategic use of information technology to gaincompetitive advantage. Strategic use of information technology may be

at the business-level, firm level or industry level. Pay attention to how

information technology is used at each level, especially strategies

employed at each level. Strategic transition and its management is

crucial for successfully steering the organization into new technology.

Pay attention to the fact the information technology is widely

used in every type of organization to be competitive, to keep pace with

competition, to meet the legal requirements, and to improve the

production. Hence, strategic use of information technology results insignificant competitive advantages. This section deserves careful

attention.

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Chapter 3: Information Systems,Organizations, Management and

Strategy

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organizations Information

Technology

Mediating Factors

Environment

Culture

Structure

Standard proceduresBusiness process

Politics

Management Decisions

Chance

Organizations And Information Technology

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StructureHierarchy

division of labor

Rules,procedures

Business processesProcess

Rights/obligations

Privileges/responsibilities

ValuesNorms

People

Environmental

resources

Environmental

outputs

FORMAL ORGANIZATION

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Organization (technical definition)

A Stable, formal, social structure that takes resources from

the environment and processes them to produce outputs.

Organization (behavioral definition)

A collection of rights, privileges, obligations, and

responsibilities that are delicately balanced over a period oftime through conflict and conflict resolution.

Bureaucracy

Formal Organization with a clear-cut division of labor, abstract

rules and procedures, and impartial decision making that uses

technical qualifications and professionalism as a basis for

Promoting employees.

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STRUCTURAL CHARACTERISTICS OF ALL

ORGANIZATIONS

Clear division of labor

Hierarchy

Explicit rules and proceduresImpartial judgments

Technical qualifications for

positions

Maximum organizationalefficiency

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ORGANIZATIONAL STRUCTURES

Orga izatio -

al Ty e

escri tio E am le

Entrepreneurialstructure

oung, small irm in a ast-changingenvironment. It has a simple structure and ismanaged by an entrepreneur serving as its singlechie executive o icer.

mall start-business

Machinebureaucracy

Large bureaucracy existing in a slo ly changingenvironment, producing standard products. It isdominated by a centralized management teamand centralized decision making.

Midsizemanu acturiirm

Divisionalizedbureaucracy

ombination o multiple machine bureaucracies,each producing a di erent product or service, alltoped by one central headquarters.

Fortune 500irms such a

general mot

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ORGANIZATIONAL STRUCTURES

Organization-al Type

escription Example

Professionalbureaucracy

Knowledge-based organization wheregoods and services depend on theexpertise and knowledge of professionals.

ominated by department heads withweak centralized authority.

aw firms,school systehospitals

Adhocracy Task force organization that must re torapidly changing environments. Consistsof large groups of specialists organizedinto short-lived multidisciplinary teamsand has weak central management.

Consulting fisuch as thecorporation.

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Summary of salient features of

organizationsCommon Features

Formal Structure

Standard operatingprocedures(SOPs)

Politics

Culture

Unique features Organizational type

Environments Goals

Power

Constituencies

Function

Leadership

Tasks

Technology

Business processes

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Information Systems department

The Formal organizational unit that is responsible for the information

systems function in the organization.

ProgrammersHighly trained technical specialists who write computer software

instructions.

Systems analysts

Specialists who translate business problems and requirements into

information requirements and systems,acting as liaison between theinformation systems department and the rest of the organization.

Information systems managers

Leaders of the various specialists in the information systems department.

Chief information officer(CIO)Senior manager in charge of the information systems function in the firm.

nd users

epresentatives of departments outside the information systems group for

hom applications are developed.

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THE ORGANIZATION

Senior management

Major end users(divisions)

Information Systems department

IT Infrastructure

HardwareSoftware

ata storage

Networks

Information Systems Specialists

CIOManagers

Systems analysts

Systems designers

Programmers

Network specialists

atabase administrator

Clerical

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Microeconomic model of thee firmM

odel of the firm that views information technology as a factor ofproduction that can be freely substituted for capital and labor.

Transaction cost theoryEconomic theory stating that firms grow larger because they can

conduct market place transactions internally more cheaply than

they can with external firms in the marketplace.Agency theoryEconomic theory that views the firm as a nexus of contracts among

self-interested individuals who must be supervised and managed.

Virtual organizationOrganization using networks to link people,assets and ideas to create

and distribute products and services without being limited to traditional

organizational boundaries or physical location.

How Information Systems Affect the Organizations

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TASK

TECHNOLOGY

STRUCTURE

PEOPLE

Organizational Components and Change

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Classical model of management

Traditional description of management that focused on its

formal functions of planning, organizing, coordinating,

deciding and controlling.

Behavioral models

escriptions of management based on behavioral scientistsobservations of what managers actually do in their jobs.

Managers and Decision-Making

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Managerial roles

Expectations of the activities that managers should perform in an

organization.

Interpersonal roles

Mintzbergs classification for managerial roles where managers act

as figureheads and leaders for the organization.

Informational roles

Mintzbergs classification for managerial roles where managers act as

the nerve centers of their organizations,receiving and disseminating

critical information.

Decision roles

Mintzbergs classification for managerial roles where managers

initiate activities,handle disturbances,allocate resources andnegotiate conflicts.

Managerial Roles in Behavioral Model

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The Process of Decision-MakingStrategic decision making

Determining the long-term objectives, resources and policies of an

organization.

Management control

Monitoring how efficiently or effectively resources are utilized and how

well operational units are performing.

Operational control

Deciding how to carry out specific tasks specified by upper and middle

management and establishing criteria for completion and resource

allocation.

Knowledge-level decision making

Evaluating new ideas for products, services, ways to communicate new

knowledge, and ways to distribute information throughout the

organization.

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Unstructured decisionsNon-routine decisions in which the decision maker must

provide judgement, evaluation, and insights into the problem

definition; there is no agreed-upon procedure for making such

decisions.

Structured decisions

Decisions that are repetitive, routine, and have a definite

procedure for handling them.

Types of Decisions

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Type of

decisionStructured

Semi-

structured

U n-

structured

Organizational level

Operational knowledge management Strategic

TPS

Office

systems

KWS

MIS

DSS

ESS

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Cognitive style

Underlying personality dispositions toward the treatment of

information, selection of alternatives, and evaluation of consequences.

Systematic decision makers

cognitive style that describes people who approach a problem by

structuring it in terms of some formal method.

Intuitive decision makers

Cognitive style that describes people who approach a problem with

multiple methods in an unstructured manner, using trail and error to

find a solution.

Organizational models of decision making

Models of decision making that take into account the structural and

political characteristics of an organization.

Individual Models of Decision-Making

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Bureaucratic models of decision making

M

odels of decision making where decisions are shaped by theorganizations standard operating procedures(SOPs).

Political models of decision making

Models of decision making where decisions result from competition andbargaining among the organizations interest groups and key leaders.

Garbage can model

Model of decision making that states that organizations are not rational

and that decisions are solutions that become attached to problems for

accidental reasons.

Organizational Models of Decision-Making

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What is Business Strategy?

Organization has a limited set of resources (e.g. time,people, money, physical resources) and they must decidehow to use those resources.

Example: You have the following resources: $500,000

A building

10 employees A patent on new invention

Strategy is deciding what the organization is going to do and how itwill use use its resources

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Examples of Strategies

Strategy 1: manufacture equipment with the money

and use the building and the people to manufacture

widgets. Strategy 2: Outsource the production of widgets

and use the people and building to be widget

distributor - or perhaps a widget store.

Strategy 3: Sell the patent to a larger firm, sell the

building, fire the employees and retire!

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Strategy vs. Tactic

Strategy focuses essentially on deciding on whatthe

organization is trying to do, what it is trying to become

within its business environment. Changing strategy isdifficult and often causes problems.

Tactic is the implementation of the strategy. It is the set

of management decisions focussed on how to achieve

the strategic objectives.

Example: once the organization decides that it wants to be a

widget manufacturer, there are many decisions that must be made

about how to profitably manufacture widgets.

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Strategic Decisions

Strategic decisions address questions such as:What products or services will be provide?

Will we focus on providing low cost goods/services?

Will we focus on providing unique goods/services?

Where will we sell our goods/services? To whom?

IT can assist the strategic decision maker (e.g. ESS).More importantly, IT is likely to be critical to theimplementation of the strategy.

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Elements of Strategic Management

Long range planning

Responsive

management Innovation

ision

Mission

Strategic

Managerial

erational

Information

ec nology

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The Role of IT

Create systems that provide strategic advantage

Supports strategic changes, such as

business reengineering

Provides business intelligence

Competitive intelligence

Sustainable competitive advantage

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Competitive Advantage

What makes strategy difficult is that most

business environments are competitive. Need to

try to "second guess" the competition.

Competitive advantage: what sets the firm apart

from the rest of its competitors.

Basis for competition: cost, speed, quality,

variety, level of service,...

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Strategic Information Systems

Strategic information systems computer systems at any level of an organization that

change the goals, processes, products, services, or

environmental relationships to help the organization

gain a competitive advantage

Information considered as a resource, much like

capital and labor

IT-critical competitive strategies: Customer lock-in, customer lock-out, new business entry

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STRATEGY LEVELS AND INFORMATION

TECHNOLOGY (IT) - ANOTHER FRAMEWORKSTRATEGIES MODELS IT TECHNIQUES

INDUSTRYcooperation vs. competition Competitive forces electronic transactions

licensing Network economics communications networks

standards Inter-organizational systemsinformation partnership

FIRMSynergy Core competency knowledge systems

Core competencies organizational systems

BUSINESSLow Cost producer Value chain analysis data mining

Differentiation of

products/services

IT-based products / services

Scope of competition

(global vs. niche)

Inter-organizational systems

supply chain management

efficient customer response

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Value Chain AnalysisValue Chain Analysis

Highlights the primary and supportHighlights the primary and supportactivities that add athat add amargin of valuemargin of value to a firms product/service where IS canto a firms product/service where IS canbest be applied to achieve a competitive advantage.best be applied to achieve a competitive advantage.

Primary activities:Primary activities: Activities most directly related to the production andActivities most directly related to the production and

distribution of a firms products/servicesdistribution of a firms products/services Consist of inbound logistics, operations, outboundConsist of inbound logistics, operations, outboundlogistics, sales and marketing, servicelogistics, sales and marketing, service

Support activities:Support activities:

Activities that make the delivery of primary activitiesActivities that make the delivery of primary activitiespossiblepossible Consist of organizations infrastructure, humanConsist of organizations infrastructure, humanresources, technology, procurementresources, technology, procurement

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The Value Chain for a Restaurant

Each box represents a primary process

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IS to Support Product/Service Differentiatio

Product/service differentiation

strategy for creating brand loyalty by

developing new and unique products/services

that are not easily duplicated by competitors

e.g. Citibanks ATM

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IS to Support Niche Focus Focused differentiation

strategy for developing new market niches for specializedproducts/services

Data mining

analysis of large pool of data to find patterns and rules that

can be used to guide decision-making and predict future

behavior

e.g. direct marketing

Applications of Data mining

Identifying individuals or organizations most likely to

respond to a direct mailing.

Predicting which customers are likely to switch to

competitors.

Identifying common characteristics of customers who

purchase the same product.

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IS to Support Low Cost Strategy Supply chain management

integrates supplier, distributors, and customer logisticsrequirements into one cohesive process

to reduce inventory cost or underutilized staff

e.g.Wall-Marts continuous replenishment system

lock in customer and raise switching costs

expense a customer incurs in lost time and expenditureof resources when changing from one supplier to acompeting supplier

e.g. Baxter Healthcares stockless inventory

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Business Level Strategy

e Business irm

en ors ustomers

Su ly ain

anagement

Stockless Inventory

ontinous e lenis ment

Just-in-time elivery

Intra irm Strategy

ro uct ifferentiation

ocuse ifferentiation

Lo -cost ro ucer

fficient ustomer

es onse

oint-of-sale systemsatamining

Business Level Strategy

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Firm-Level Strategies

A firm is a collection of business units

Synergy

outputs of some business units used as inputs to

other units IS to tie operations of business units

Core competencies

activities at which a firm is a world-class leader IS to encourage sharing of knowledge

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Industry-Level Strategies

Competition with other firms

Cooperation through information partnership

e.g. American Airlines and Citibank

Models to help analysis

Competitive forces

Network economics

based on concept of a network where adding another participant

entails no marginal costs but can create much larger marginal

gain

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COMPETITIVE FORCES MODEL

THE FIRMTRADITIONAL

COMPETITION

NEW

MARKET

ENTRANTS

Bargaining

power of

SUPPLIERS

Bargaining

power of

CUSTOMERS

SUBSTITUTE

PRODUCTS

& SERVICES

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Managing Strategic Transitions

A movement from one level of socio-

technical system to another. Often required

when adopting strategic systems thatdemand changes in the social and technical

elements of an organization.

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Questions Managers Should Ask

Forces at work in the industry and strategies

Using information and communication technology The direction and nature of change within the industry

Opportunities to be gained by introducing informationsystems technology

Kinds of systems are applicable to the

Being behind or ahead of the industry in its application ofinformation systems

The current business strategic plan, and the cur-rentstrategy for information services

Sufficient technology and capital to develop a strategicinformation systems initiative

The greatest value to the firm

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Challenges

Integrations

Sustainability of competitiveadvantage