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1Chapter
Managing the DigitalManaging the Digital
FirmFirmManaging the DigitalManaging the Digital
FirmFirm
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OBJECTIVES
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Explain why information systems are soimportant today for business and management
Evaluate the role of information systems intodays competitive business environment
Assess the impact of the Internet and Internettechnology on business and government
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Define an information system from both atechnical and business perspective anddistinguish between computer literacy andinformation systems literacy
Identify the major management challenges tobuilding and using information systems
OBJECTIVES (Continued)
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
DaimlerChrysler Case
Challenge: 104 plants, 37 countries, 14,000 suppliers
Solutions: Integrated Volume Planning System connects demand side of business with
suppliers, reducing inventories.
Powerway helps 3,400 suppliers track parts and quality, reducing errors.
Demonstrates ITs role in operational excellence, better quality products, and agilitytime tomarket
Illustrates the emerging digital firm landscape where information can flow seamlessly
among business partners to create a superior customer experience
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WHY INFORMATION SYSTEMS?
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Capital managementCapital management
Foundation of doing businessFoundation of doing business
ProductivityProductivity
Strategic opportunity and advantageStrategic opportunity and advantage
Why Information Systems MatterWhy Information Systems Matter
There are four reasons why IT makes a difference to theThere are four reasons why IT makes a difference to the
success of a business:success of a business:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
IT is the largest single component of capitalinvestment in the United States.
About $1.8 trillion is spent each year by Americanbusinesses.
Managers and business students need to know howto invest this capital wisely.
The success of your business in the future maywell depend on how you make IT investment
decisions.
Capital Management:Capital Management:
WHY INFORMATION SYSTEMS?
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Information Technology Capital InvestmentInformation Technology Capital Investment
Figure 1-1
WHY INFORMATION SYSTEMS?
Source: Based on the data in U.S. Department ofCommerce, Bureau of Economic Analysis, National
Income and Product Accounts, Tables 5.2 and 5.8,2004.
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Most businesses today could not operate withoutMost businesses today could not operate without
extensive use of information systems andextensive use of information systems and
technologies.technologies.
IT can increase market share.IT can increase market share.
IT can help a business become a high-quality,IT can help a business become a high-quality,
low-cost producer.low-cost producer.
IT is vital to the development of new products.IT is vital to the development of new products.
Foundation of doing business:Foundation of doing business:
WHY INFORMATION SYSTEMS?
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
The Interdependence between Organizations andThe Interdependence between Organizations and
Information SystemsInformation Systems
Figure 1-2
WHY INFORMATION SYSTEMS?
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
IT is one of the most important tools managershave to increase productivity and efficiency ofbusinesses.
According to the Federal Reserve Bank, IT hasreduced the rate of inflation by 0.5 to 1% in thelast decade. For firms this means IT is a majorfactor in reducing costs.
It is estimated that IT has increased productivityin the economy by about 1% in the last decade.For firms this means IT is a major source of labor
and capital efficiency.
WHY INFORMATION SYSTEMS?
Productivity:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Create competitive advantage: IT makes itpossible to develop competitive advantages.
New Business Models: Dell Computer has builtits competitive advantage on an IT enabled build-to-order business model that other firms have not
been able to imitate.
WHY INFORMATION SYSTEMS?
Strategic Opportunity and Advantage:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Create new services: eBay has developed thelargest auction trading platform for millions of
individuals and businesses. Competitors havenot been able to imitate its success.
Differentiate yourself from your competitors:
Amazon has become the largest book retailer inthe United States on the strength of its hugeonline inventory and recommender system. It hasno rivals in size and scope.
WHY INFORMATION SYSTEMS?
Strategic Opportunity and Advantage:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Carr has written that whatever advantages firmsbuild using IT can be easily copied by
competitors.
This view is not supported by the evidence:Amazon, eBay, Dell, Wal-Mart and Apple's
iTunes are just a few firms that have built andmaintained technology-based advantages.
How Much Does IT Matter?
WHY INFORMATION SYSTEMS?
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Commoditization of technology is typically aspur to innovation and new business models,
products and services.
Competitive advantage derives not from thetechnology, but on how businesses use the
technology.
Innovations in business processes,management and organization are not easily
copied from one firm to another.
How Much Does IT Matter?
WHY INFORMATION SYSTEMS?
8/14/2019 Mis9 Ch01 Ppt
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Internet growth and technology convergence
Transformation of the business enterprise
Why IT Now? Digital Convergence and theChanging Business Environment
Growing impact of IT in business firms can be
assessed from the following five factors:
WHY INFORMATION SYSTEMS?
8/14/2019 Mis9 Ch01 Ppt
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Growth of a globally connected economy
Growth of knowledge and information-basedeconomies
Emergence of the digital firm
WHY INFORMATION SYSTEMS?
Why IT Now? Digital Convergence and theChanging Business Environment (Continued)
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Growth of the Internet: 120 million online in theUnited States, 500 million global users
The Internet is bringing about a convergence oftelecommunications and computing: VoIPtelephones.
WHY INFORMATION SYSTEMS?
The Internet and Technology Convergence:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Growth in e-business, e-commerce, and e-government
Internet is bringing about rapid changes inmarkets and market structure: financial servicesand banking such as eTrade.com.
The Internet is making many traditionalbusiness models obsolete: the corner musicstore and video store.
WHY INFORMATION SYSTEMS?
The Internet and Technology Convergence:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Flattening
Decentralization
Flexibility
WHY INFORMATION SYSTEMS?
Transformation of the Business Enterprise:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Location independence
Low transaction and coordination costs
Empowerment
Collaborative work and teamwork
WHY INFORMATION SYSTEMS?
Transformation of the Business Enterprise (Continued):
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Management and control in a global marketplace
Competition in world markets
Global workgroups
Global delivery systems
WHY INFORMATION SYSTEMS?
Globalization:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Knowledge and information-based economies
New products and services
Knowledge as a central productive and strategicasset
WHY INFORMATION SYSTEMS?
Rise of the Information Economy:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Time-based competition
Shorter product life
Turbulent environment
Limited employee knowledge base
WHY INFORMATION SYSTEMS?
Rise of the Information Economy (Continued):
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
The Growth of the Information Economy
Figure 1-3
WHY INFORMATION SYSTEMS?
Source: U.S. Department of Commerce, Bureau of theCensus, Statistical Abstract of the United States, 2003,
Table 615; and Historical Statistics of the United States,Colonial Times to 1970, Vol. 1, Series D, pp. 182-232.
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Digitally enabled relationships with customers,suppliers, and employees
Core business processes accomplished usingdigital networks
Digital management of key corporate assets
WHY INFORMATION SYSTEMS?
Emergence of the Digital Firm:
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Agile sensing and responding to environmentalchanges
Seamless flow of information within the firm, andwith strategic partners
WHY INFORMATION SYSTEMS?
Emergence of the Digital Firm (Continued):
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
The Emerging Digital FirmThe Emerging Digital Firm
Figure 1-4
WHY INFORMATION SYSTEMS?
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
What Is an Information System?
Technology perspective:Technology perspective:A set of interrelated
components that collect (or retrieve), process, store,
and distribute information to support decision
making and control in an organization
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
What is an Information System? (Continued)
Data: Streams of raw facts representing events
such as business transactions
Information: Clusters of facts meaningful anduseful to human beings in the processes such as
making decisions
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Data and Information
Figure 1-5
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Functions of an Information System
Figure 1-6
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Rely on computer hardware and softwareRely on computer hardware and software
Processing and disseminating informationProcessing and disseminating information
Fixed definitions of data and proceduresFixed definitions of data and procedures
Collecting, storing, and using informationCollecting, storing, and using information
PERSPECTIVES ON INFORMATION SYSTEMS
Computer-Based Information System (CBIS)
M I f i S
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Information systems are an organizational andInformation systems are an organizational and
management solution to business challenges thatmanagement solution to business challenges that
arise from the business environment.arise from the business environment.
PERSPECTIVES ON INFORMATION SYSTEMS
Information systems are more than just technology.Businesses invest in IS in order to create value and
increase profitability.
A Business Perspective on Information Systems
f SM t I f ti S t
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Based on information technology but also requireBased on information technology but also require
significant investment in organizational andsignificant investment in organizational andmanagement changes and innovationsmanagement changes and innovations
IS create value primarily by changing businessIS create value primarily by changing business
processes and management decision making.processes and management decision making.
PERSPECTIVES ON INFORMATION SYSTEMS
A Business Perspective on Information Systems(Continued)
M t I f ti S tM t I f ti S t
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
The Business Information Value Chain
Figure 1-7
M t I f ti S tM t I f ti S t
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Information Systems Are More than Computers
Figure 1-8
M t I f ti S tM t I f ti S t
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Information systems literacy:Information systems literacy: Broad-basedBroad-based
understanding of information systems that includesunderstanding of information systems that includes
behavioral knowledge about organizations,behavioral knowledge about organizations,
management and individuals using informationmanagement and individuals using informationsystems as well as technical knowledge aboutsystems as well as technical knowledge about
computerscomputers
Computer literacy:Computer literacy: Knowledge about informationKnowledge about informationtechnology, focusing on understanding howtechnology, focusing on understanding how
computer technologies workcomputer technologies work
PERSPECTIVES ON INFORMATION SYSTEMS
M t I f ti S tM t I f ti S t
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Sales and marketingSales and marketing
ManufacturingManufacturing
FinanceFinance
AccountingAccounting
Human resourcesHuman resources
PERSPECTIVES ON INFORMATION SYSTEMS
Major Business Functions Rely on Information Systems
M t I f ti S tManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Three Important Dimensions of Information Systems
Organizations
Managers
Technology
PERSPECTIVES ON INFORMATION SYSTEMS
You will need to understand and balance thesedimensions of information systems in order to createbusiness value.
Dimensions of Information Systems
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
People
Structure
Business processes
Culture
Politics
PERSPECTIVES ON INFORMATION SYSTEMS
The Organizational Dimension of Information Systems
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Managers are:
Sense makersSense makers
Decision makersDecision makers
PlannersPlanners
Innovators of new processesInnovators of new processes
Leaders: set agendasLeaders: set agendas
PERSPECTIVES ON INFORMATION SYSTEMS
The Management Dimension of Information Systems
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
PERSPECTIVES ON INFORMATION SYSTEMS
The Management Dimension of Information Systems(Continued)
Managers who can understand the role ofManagers who can understand the role of
information systems in creating business value areinformation systems in creating business value arethe key ingredient to success with systems, andthe key ingredient to success with systems, and
cannot easily be replicated by your competitors.cannot easily be replicated by your competitors.
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Hardware:Hardware: Physical equipmentPhysical equipment
Software:Software: Detailed preprogrammed instructionsDetailed preprogrammed instructions
Storage:Storage: Physical media for storing data and thePhysical media for storing data and thesoftwaresoftware
PERSPECTIVES ON INFORMATION SYSTEMS
Information technology is one of the tools managersInformation technology is one of the tools managersuse to cope with change:use to cope with change:
The Technology Dimension of Information Systems
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Communications technology:Communications technology: Transfers dataTransfers data
from one physical location to anotherfrom one physical location to another
Networks:Networks: Links computers to share data orLinks computers to share data orresourcesresources
PERSPECTIVES ON INFORMATION SYSTEMS
The Technology Dimension of Information Systems(Continued)
Managers need to know enough about informationManagers need to know enough about informationtechnology to make intelligent decisions about how totechnology to make intelligent decisions about how touse it for creating business value.use it for creating business value.
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Complementary assets:
New business processes
Management behavior
Organizational culture
Training
PERSPECTIVES ON INFORMATION SYSTEMS
Complementary Assets and Organizational Capital
Management Information SystemsManagement Information Systems
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Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Supportive business culture that values efficiencyand effectiveness
Efficient business processes, decentralization ofauthority
Highly distributed decision rights
A strong information system (IS) developmentteam
PERSPECTIVES ON INFORMATION SYSTEMS
Organizational capital:
Management Information SystemsManagement Information Systems
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PERSPECTIVES ON INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Variation in Returns on Information Technology Investment
Figure 1-9
Source: Based on Erik Brynjolfsson and Lorin M.Hitt, Beyond Computation: Information
Technology, Organizational Transformation and
Business Performance. Journal of Economic
Perspectives 14, no. 4 (Fall 2000). Used withpermission of the American Economic Association.
Management Information SystemsManagement Information Systems
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CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
Sociotechnical Systems
Optimize systems performance:
Technology and organization
Organizations mutually adjust to one another
until fit is satisfactory
Management Information SystemsManagement Information Systems
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CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Management Information SystemsManagement Information SystemsChapter 1 Managing the Digital FirmChapter 1 Managing the Digital Firm
A Sociotechnical Perspective on Information Systems
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