INFS 1602 Chapter 5 summary notes5.1 Business processes and information systems

Business processes

Refers to the manner in which work is organised, coordinated and focused to produce a valuable product or service

Business process can be a competitive advantage if they enable the company to innovate or to execute better than its rivals

Business process can also be a liability when they are based on out-dated ways of working that hinders efficiency

How information technology enhance the business process

Information systems automate many processes that were once manually performed e.g. checking client’s credit, generating invoices and shipping order

They can also replace sequential steps with tasks that can be performed simultaneously and eliminating delays in decision making

5.2 Types of information systems

Large cross functional systems integrate the activities of related business processes and organizational units (the four main being; manufacturing and production, finance and accounting, sales and marketing and human resource).

Each level of management uses a specific type of system to support the decisions

Transaction processing systems (TPS)

TPS provide the necessary kind of information used by operational managers to keep track of the elementary activities and transactions e.g. sales, receipts etc.

The purpose of such an information processing system at this level is to answer routine questions and to track the flow of transactions through the organisation.

This operational system has tasks, resources and goals that are pre-defined and highly structured – for fast, current and accurate retrieval of information.

TPS is required to monitor the status of internal operations and the firm’s relations with the external environment.

Management information systems and decision-support systems

Middle management requires information systems which will help monitor, control and help make decisions and admin activities – informs middle management on current performance

Management information systems (MIS) is term for the IS which serves the middle management

MIS summarises and reports the data supplied from the transaction processing systems (TPS)

Deal with questions that are specified in advance and have a predefined procedure for answering them.

Uses simple routine decision making tasks The Decision-support Systems (DSS) – supports non-routine decision making for middle

management DSS are used for unique and rapidly changing procedures where the solutions are not

completely pre-defined. It is user friendly and uses information from external sources e.g. stock market DSS is also referred to as an business intelligence system because they focus on helping users

make better business decisions

Executive support systems for senior management

Senior managers need systems that address strategic issues and long-term trends both in the internal and external environment.

Executive support systems (ESS) helps senior managers make such decisions ESS works on non-routine decisions requiring judgement, evaluation and insight Data is provided to managers via a portal which uses a web interface to present integrated

personalised business content. Incorporate external information e.g. new tax laws as well as summarised data from MIS and

DSS

5.3 Decision making and information systems

Business value of improved decision making

Decision making is done at all levels of a business. Adding all small changes to improve decision making can become a very large investment

(profit/gain) for the company – in terms of revenue and profit.

Types of decisions

Unstructured decision – those that require the judgement, evaluation and insight to solve the problem.

Structured decision – repetitive and routine which involve a definite procedure for handling them.

Semi-structured decisions – only part of the problem has clear-cut answers.

The decision making process

4 stages in the process: intelligence, design, choice and implementation Intelligence – identifying the problem, why, where and what effects it has on the firm Design – possible solutions for the problem Choice – best solution Implementation – how well is the solution working and ways of improving the solution

Managers and decision making in the real world

Managerial roles

Classic model of management – their role is to plan, organise, coordinate, decide and control Behavioural models – perform a great deal of work that is around 9 min each (only 10% of

the work last for about an hour), prefer ad hoc and specific information, prefer oral presentation of information rather than written work and they give high priority to maintaining diverse and complex web of contacts that helps them execute short and long term goals.

Managerial roles fell into 3 categories;- Interpersonal roles – act as figureheads for the organisation when they are representing

the company to the public- Informational roles – act as nerve centres where they receive up to date information and

transfer it to places that require the information- Decisional roles – make decisions, initiate new activities and handle disturbances that

arise in the organisation.

Real-world decision making

There are 3 reasons why information technology does not always produce positive results:- Information quality – requires high quality information to make the high quality

decisions- Management filters – managers can absorb only certain information and filter out the

rest. They are used to focusing on certain kinds of problems and solutions and reject information that does not conform to their prior conceptions.

- Organisational inertia and politics – when making major changes in the business, decisions are often taken by balancing the various interest groups rather than the best solution to the problem

5.4 Systems for decision support

Group decision-support systems (GDSS) enable managers and teams to work collectively and make decisions and design solutions for unstructured and semi-structured problems in an electronic environment

Management Information Systems (MIS)

MIS not only summarise and report data collected but also highlight exceptional conditions e.g. when sales quota falls below average.

Decision-Support Systems (DSS)

Some contemporary DSS are data-driven Data-driven DSS support decision making by enabling users to extract useful information

that was previously buried in large quantities of data.

Components of DSS

DSS database – collection of current or historical data. The databases are generally extracts or copies of production databases so that using the DSS does not interfere with critical operational systems.

DSS user interface allows for easy interaction between users and the software tools (now popular to do graphical displays in terms of web interface)

DSS software system contains tools used for data analysis. Statistical modelling helps establish relationships – optimizing models determine optimal

resource allocation to maximize or minimize specified variables e.g. cost and time Sensitivity analysis model deals with “what-if” analysis.

Using spread sheet pivot tables to support decision making

Pivot table displays two or more dimensions of data in a convenient format e.g. payment type and region, to effectively answer “what-if” queries from a large database in order to make decisions.

5.5 Executive support systems (ESS) and the balanced scorecard framework

Two critical parts that need to be addressed for an effective ESS; first is the need for a methodology for understanding what exactly is the right information for the firm and the second is to develop a system that is capable of delivering this information to the right people at the right time.

Leading methodology currently is balanced scorecard method – which focuses on measurable outcomes on four dimensions of firm’s performance (finance, process, customer and growth).

Performance on each dimension is measured via the key performance indicators (KPIs) – measured against standards set by the executives

The role of executive support systems in the firm

Challenge faced by executive support systems is to integrate data from systems designed for different purposes so the management can have a firm-wide view of the organisation

5.6 The knowledge management landscape

Knowledge that is shared is useless and therefore knowledge management systems are used Knowledge management is a key aspect of businesses which is said to improve the stock

market value of the company

Important dimensions of knowledge

Data – flow of transactions that is captured by the company’s systems To turn data into information, the company the resources must be organised into categories

of understanding To turn information into knowledge, the company has to discover patterns and expend

additional resources Wisdom is thought to be the collective and individual experience of applying knowledge to

the solution to problems and how knowledge is applied to resolve the problem

Non documented knowledge is called tactic knowledge Documented knowledge is called explicit knowledge Knowledge is situational and contextual Knowledge is a firm’s non-tangible asset

Organisational learning and knowledge

Organisation gains experience on how to store knowledge by trial and error, planned activities and feedback from customers

These skills above are implemented into the business process where companies actively change the way in which business decisions are made – process called organisation learning

The knowledge management value chain

Knowledge management refers to the set of business processes developed in an organisation to create, store, transfer, and apply knowledge.

Allows companies to learn from the environment and implement it into their business process

Each part of the value chain adds value to data and information so it becomes knowledge useful for the business process

20% of the value chain is information systems and the rest 80% is management and organisational activities

VALUE CHAIN

Knowledge acquisition

Can be done in several ways depending on the type of information that the company seeks E.g. build corporate repositories in which documents, e-mails , reports etc. can be managed E.g. build online expert network so that employees can find the expert of the company who

has the knowledge in his or her head At other times, companies have to learn or discover new knowledge e.g. engineers

Knowledge storage

Usually done in a database Expert systems also help corporations preserve the knowledge that is acquired by

incorporating that knowledge into organisational processes and cultures

Knowledge dissemination

How to find the right knowledge and information from a sea of data available. This is done via informal networks, shared management experience communication and training programs that help the managers focus their attention on the important knowledge and information

Knowledge application

Organisational knowledge must become a systematic part of management decision making and become situated in decision-support systems

Building organisational and management capital: collaboration, communities of practice, and office environments

Communities of practice are informal social networks of professionals and employees within and outside the firm who have similar work-related activities and interests.

COPs can make it easier For people to reuse knowledge by pointing community members to useful documents, and filtering information for newcomers

Types of knowledge management systems

3 types of knowledge management systems; enterprise-wide knowledge management systems, knowledge work systems, and intelligent techniques

Enterprise-wide knowledge management systems are general-purpose firm wide efforts to collect, store, distribute and apply digital content and knowledge

Knowledge work systems was brought about to help engineers discover new knowledge e.g. computer-aided design, simulation and virtual reality systems

Knowledge work systems are specialised systems built for engineers, scientists and other knowledge workers charged with discovering and creating new knowledge for a company

Knowledge management also includes a diverse group of intelligent techniques each with different objectives

5.7 Enterprise-wide knowledge management systems

Deals with knowledge that is in a structured form (e.g. text documents), semi structured (e.g. e-mails) and other kinds of information that resides in the minds of employees minds

Enterprise content management systems

These systems help with knowledge capture, storage, retrieval, distribution and preservation of structured, semi structured and unstructured knowledge

Major enterprise content management systems also allow users to access external sources of information

Key problem in managing knowledge is the creation of an appropriate classification scheme or taxonomy (place knowledge in appropriate categories for easy use)

Digital asset management systems help companies classify, store, and distribute these digital objects e.g. for Coca Cola company for it to transport the brand logo across the world to reduce redundancy

Knowledge network systems

Addresses problem of storing knowledge that is not in digital form but rather in the minds of experts

It provides an online directory to make it easy for employees to find the appropriate expert in the company

Some systems go even further and store frequently asked questions and solutions in a database

Collaboration tools and learning management systems

Commercial software vendor are used for collaboration within the enterprise e.g. blogs and Microsoft SharePoint

Social bookmarking allows users to bookmark web pages and create a list that can be shared among the employees hence allowing collaboration

Learning management system (LMS) helps with employee learning and training