Chapter 1 Managing in the Information Age. Introduction The information revolution has been underway...

Chapter 1

Managing in the Information Age

Introduction

• The information revolution has been underway for close to five decades

• Important information, broadly disseminated, radically alters the balance of power among individuals, institutions, and governments

• To succeed in this rapidly changing environment, managers must remain fluent in new practices and techniques

How Organizations Use Information

• Organizational Resources– Money– Skilled Employees– Information– Physical Property– Time

• The task of managers is to use these resources in an optimal way to fulfill an organization’s mission, that is, resource management

Information and People

• In the information-intensive environment, the creative combination of people and information can be a powerful force in achieving superior performance

• Skilled people coupled with advanced information technology has revolutionized commerce and altered the concept of management

IT Impacts on Business

• Advanced technology redistributes knowledge among all employees and undermines traditional authority that is based on privileged access to information

• Rapid, constant, and deep access to institutional knowledge will radically transform organizations, collapsing levels of management, and flattening organizational hierarchy

Information Technology Organizations

• On an organizational chart, IT is generally classed as a department like marketing or manufacturing

• Operationally, IT operates as a business within a business, supporting all other units in different ways

Functions and IT Support

Product Development

Manufacturing

Distribution

Sales

Service

Finance and Accounting

Administration

Design AutomationMaterials LogisticsWarehouse AutomationOrder Entry, Sales AnalysisParts LogisticsLedger, Planning, AP, AROffice Systems, Personnel

Records

Management Tasks

• Line Responsibilities – directly related to accomplishing the responsibilities of the organization

• Staff Responsibilities - support line functions in accomplishing their primary mission

• Senior IT managers have a hybrid role, blending both staff and line missions

Managing Information Technology

• IT describes an organization’s computing and communications infrastructure

• IT management includes the tasks of managing the infrastructure, standards, and operations; making technology-related investments; and recommending appropriate corporate policy

Evolution of IT Management

• 1950s to 1960s – automation of routine business data handling

• 1970s – connection of terminals to mainframes shifted focus from providing data to creating knowledge (Decision Support Systems)

Evolution of IT Management

• 1980s – Widespread telecommunications and data networking moved computing from the mainframe to the desktop

• 1990s – Internet technologies and applications extended the boundaries of the enterprise. New business models took hold with e-business and ASPs

Types of Information Systems

• Transaction Processing Systems

• Management Information Systems

• Decision Support Systems

• Office Automation Systems

• Expert Systems

Internet-Based Business Systems

• Prior to 1990, IT systems focused on supporting the value chains within an organization

• With widespread Internet technology, value chain management could extend outside an organization becoming much more complex and responsive

Enterprise Resource Planning

• With digital value chain data, organizations– Improve responsiveness to customer needs– Accomplish just-in-time inventory

management– Increase operational efficiency– Decrease internal costs– Increase service and product quality

IT Management Challenges

• Organizations have high expectations for the benefit they will derive from technology and software purchases

• Technology brings structural changes to the organization

• Unmanaged expectations and ongoing change test the personnel management skills of IT managers

• IT managers must be technological leaders and superb generalists

Controls and Environmental Factors

• Knowledge based organizations must have rigorous control mechanisms in place

• Loss of control in highly automated operations can give rise to rapid error propagation

• Intra and extranets linking different organizations make effective control even more challenging

Competitive Considerations

• Firms expect Information Technology managers to deliver the tools necessary to capture and maintain competitive advantage

• IT organizations are directly on their firm’s critical path to success

• Ineffective IT management can hinder the performance of the entire organization

People and Organizations

• Information Technology changes organizations

• These changes are perceived by many as a threat to power, position, or influence

• IT managers must develop good people management skills and be attuned to these issues

IT Management Issues

• Even though Information Technology is evolving at a phenomenal pace, critical issues facing IT managers have remained largely unchanged for years– Aligning IT and corporate goals– Re-engineering business processes– Defining IT’s role and contribution– Developing an information architecture

IT Management Issues

• Three newer issues have arisen as IT has entered the Internet age:– Using IT to improve productivity, quality, and

effectiveness– Creating or maintaining competitive

advantage through IT– Redesigning business processes to better

support corporate strategy

Maturation of IT Management

• IT has moved over the past 4 decades from supporting accounting to enabling fully integrated data based management systems

• Managers have grown from technical experts to sophisticated generalists

Managing Mature IT Organizations

• Paul Strassmann has written extensively about mature models of IT management. Their elements include:– Governance– Business Plan Alignment– Process Improvement– Resource Optimization– Operating Excellence

Information Technology Assimilation

• Over the past several decades, IT has spread from isolated, single-dimensioned functions to sophisticated, multi-faceted and integrated systems

• Shifts have occurred in application development, transitioning from largely in-house creations to more off the shelf products

Critical Success Factors

• Concept developed by John Rockart to help executives define their information needs– Two types: monitoring type and building type

• Defined four areas where executives need to search for critical success factors– The industry their firm operates in– The company itself– The environment– Time-dependent organizational areas

Critical Success Factors for IT Managers

• Managers need to answer two questions:– What conditions are necessary for IT

manager’s success today?– What tasks must be carried out very well in

order for managers to succeed?

• The answers to these questions can be grouped into four classes

Critical Areas for IT Managers

1. Business Management Issues

2. Strategic and Competitive Issues

3. Planning and Implementation Concerns

4. Operational Items

Business Management Issues

• Obtain agreement with the firm’s executives on how IT will be managed within the firm

• Operate the IT function within the parent organization’s cultural norms

• Attract and retain highly skilled people• Practice good people-management skills• Use IT to improve productivity and financial

returns

Strategic and Competitive Issues

• Develop IT strategies supporting the firm’s strategic goals and objectives

• Provide leadership in technology applications to attain competitive advantage for the firm

• Educate the management team about the opportunities and challenges involved in technology introduction

• Ensure realism in long term expectations

Planning and Implementation Concerns

• Develop plans supporting the firm’s goals and objectives

• Provide effective communication channels so that plans and variances are widely understood

• Establish partnerships with client IT organizations during planning and implementation

• Maintain realism within the organization regarding intermediate-term expectations

Operational Items

• Provide customer service with high reliability and availability

• Deliver service of all kinds on schedule and within planned costs

• Respond to unusual customer demands and to emergencies

• Maintain management processes that align operational expectations with IT capabilities

Expectations

• IT managers should supply their firm’s executives with their technical and business input so that executives can anticipate and prepare for future structural changes well in advance

• They must keep the firm’s financial and strategic goals firmly in mind and champion a realistic, practical, and innovative view of the future

Expectations

• Expectations held by the firm’s senior executives constitute a yardstick by which its IT managers will ultimately be measured

• Superior managers understand the importance of expectations and manage them effectively by being proactive

• Unskilled managers over promise and raise expectations that they are ultimately unable to fulfill

A Model for Studying IT Management

• The study of information technology management concentrates on:– Accomplishing business results– Attaining efficiency and effectiveness– Achieving and maintaining competitiveness

• Each of these elements is essential to the firm’s success

Summary

• IT is a powerful force in today’s global society

• These technologies are enabling important transformations that profoundly affect people, organizations, industries, and nations