Transcript THE STRATEGIC ROLE OF INFORMATION SYSTEMS

Lecture 2/Session 2
Key Information Technology
Systems in Organizations
© Andrew Schwarz, 2002
Slide 1
Introduction
 While we have talked about technology and
systems in a broad context, we have yet to
understand the different type of information
systems that rely upon information
technology
 This lecture will discuss the key
information systems in organizations
© Andrew Schwarz, 2002
Slide 2
Unanswered Questions
1. What are the different types of systems by
organizational level?
2. What are the different types of systems by
functional area?
3. How do organizations integrate all of the
systems?
4. What is the application of this lecture for
you, as a manager, in the digital age?
© Andrew Schwarz, 2002
Slide 3
Question #1:
What are the different types of
systems by organizational level?
© Andrew Schwarz, 2002
Slide 4
Organization Levels
Organizational Level
Types of Managers
STRATEGIC LEVEL
SENIOR MANAGERS
MANAGEMENT LEVEL
MIDDLE MANAGERS
KNOWLEDGE LEVEL
KNOWLEDGE WORKERS
OPERATIONAL
LEVEL
SALES &
MARKETING
OPERATIONAL
MANAGERS
MANUFACTURING
FINANCE
ACCOUNTING
HUMAN
RESOURCES
Systems by Org Level
 Operational level: systems monitor the elementary
activities and transactions of the firm
– Transaction Processing Systems
 Knowledge level: systems support knowledge and data
workers
– Knowledge work systems/Office Systems
 Management level: systems support monitoring,
controlling, decision-making, and administrative activities
– Management Information Systems/Decision Support Systems
 Strategic level: systems that support long-range planning
activities
– Executive support systems
© Andrew Schwarz, 2002
Slide 6
Transaction Processing Systems
 Computerized systems that perform and
record the daily routine transactions
necessary to conduct the business
 Users: operations personnel; supervisors
 Examples: accounts payable, accounts
receivable, payroll, order tracking, order
processing
© Andrew Schwarz, 2002
Slide 7
Knowledge Work Systems
 Systems that aid knowledge workers in the
creation and integration of new knowledge
in the organization
 Users: professionals, technical staff
 Examples: engineering systems, graphics
systems, 3-D systems
© Andrew Schwarz, 2002
Slide 8
How do Firms Capture Knowledge?
 Knowledge management: the set of processes
developed in an organization to create, gather,
store, maintain, and disseminate the firm’s
knowledge
– Senior executive in charge of KM: CKO
 Types of knowledge:
– Structured knowledge, such as product manuals
– External knowledge of competitors, products, and
markets (competitive intelligence)
– Tacit knowledge—knowledge in the minds of the
employees
© Andrew Schwarz, 2002
Slide 9
Importance of Knowledge
 As stated in Lecture 1, the dominant workers are
knowledge workers
 So, if all companies were given the same amount
of resources, raw materials, locations, etc., what
would be the source of competitive advantage for
that firm?
– The knowledge within the employees!
 Thus, firms are seeking to capture and retain that
knowledge so that they can have a sustainable
competitive advantage
© Andrew Schwarz, 2002
Slide 10
Systems Used to Capture Knowledge
 Expert system: captures the expertise of a human
in limited domains of knowledge
– Rules-based capture—if this happens, then I would
make this decision
– Similar to a DSS, but is built upon human knowledge
 Some companies attempt to use artificial
intelligence (AI) and neural networks so that the
systems learn from their history
– Problems with AI!
© Andrew Schwarz, 2002
Slide 11
Intelligence
 Above knowledge is intelligence, or
carrying out the knowledge through
implementation
 Companies are ultimately attempting to
create intelligent agents
– Software programs that use a knowledge bask
that carry out tasks for users or complete
business tasks
© Andrew Schwarz, 2002
Slide 12
Office Systems
 Computer systems that are designed to increase
the productivity of data workers in the office
 Users: Clerical workers
 Examples:
– Word processing: facilitate the creation of documents
(e.g. Microsoft Word)
– Desktop publishing: produces documents combining
output from various sources (e.g. Microsoft Publisher)
– Document imaging systems: convert documents and
images into digital form so they can be stored on the
computer
© Andrew Schwarz, 2002
Slide 13
Decision Support Systems
 Systems that combine data and analytic
models or data analysis tools to support
nonroutine decision making for individuals
– Use input from TPS data plus external sources
 Users: Professionals; staff managers
 Examples: sales region analysis, cost
analysis, pricing analysis
© Andrew Schwarz, 2002
Slide 14
Types of DSS
 Model driven: stand-alone system that uses
models to perform “what-if” and other
kinds of analyses
 Data-driven: system that relies upon
information within databases to make
decisions, but is not configured with a
model in mind
© Andrew Schwarz, 2002
Slide 15
Components of a DSS
TPS
User
Interface
DSS
Database
External
Data
DSS Software System
Models
OLAP Tools
Datamining Tools
User
© Andrew Schwarz, 2002
Slide 16
Group Decision Support System
(GDSS)
 An interactive computer-based system to facilitate
the solution to unstructured problems by a set of
decision-makers working together as a group
 The group uses software tools to help it arrive at a
decision
–
–
–
–
Questionnaire/voting software
Electronic brainstorming tools
Idea organizer
Electronic meeting system
© Andrew Schwarz, 2002
Slide 17
Differences between DSS/GDSS
 Users
– DSS: individuals; GDSS: groups
 Objective of use
– DSS: build models using data; GDSS: facilitate
interaction between individuals
 Effectiveness
– DSS: depends on how well the tool is built by
designers; GDSS: depends on facilitators, tools
selected, and participants
© Andrew Schwarz, 2002
Slide 18
Management Information Systems
 Systems that support managers as they plan,
control, and make decisions
– Summarize and report on a company’s basic
operations—not day-to-day, but trends
 Users: middle managers
 Examples: annual budgets, capital
investment analysis, analysis of sales data
(aggregated from TPS)
© Andrew Schwarz, 2002
Slide 19
Example of Relationship Between
TPS and MIS
TPS
Order Processing
MIS
SALES
DATA
System
ORDER FILE
Materials Resource
Planning System
PRODUCTION MASTER FILE
General Ledger
System
ACCOUNTING FILES
UNIT
PRODUCT
COST
MIS
REPORTS
PRODUCT
CHANGE
DATA
EXPENSE
DATA
MIS FILES
MANAGERS
Executive Support Systems
 Systems designed to address nonroutine
decision making
– Incorporate data from TPS, MIS, DSS, and
other external sources
 Users: senior managers
 Examples: trends in the marketplace,
forecasting, personnel planning
© Andrew Schwarz, 2002
Slide 21
Systems by Level and Decision Type
ORGANIZATIONAL LEVEL
TYPE OF
DECISION
STRUCTURED
OPERATIONAL
KNOWLEDGE
STRATEGIC
ACCOUNTS
RECEIVABLE
TPS
ELECTRONIC
SCHEDULING
OAS
SEMISTRUCTURED
PRODUCTION
COST OVERRUNS
MIS
BUDGET
PREPARATION
PROJECT
SCHEDULING
DSS
KWS
UNSTRUCTURED
MANAGEMENT
PRODUCT DESIGN
FACILITY
LOCATION
ESS
NEW PRODUCTS
NEW MARKETS
Relationship Between Systems
ESS
MIS
KWS
DSS
TPS
OAS
© Andrew Schwarz, 2002
Slide 23
Question #2:
What are the different types of
systems by functional area?
© Andrew Schwarz, 2002
Slide 24
Systems by Functional Unit
 Sales/Marketing: Systems that help the company identify
customers; develop, promote, and sell products/services;
and provide customer support
 Manufacturing/Production: Systems that deal with the
planning, development, and production of
products/services and with controlling the flow of
production
 Finance/Accounting: Systems that keep track of the firm’s
financial assets/fund flow
 Human Resources: Systems that maintain employee
records; track employee skills; job performance and
training; and support planning for employee compensation
and career development
© Andrew Schwarz, 2002
Slide 25
Examples of Systems by Functional Areas
Sales/Marketing
System
Order Processing
Market Analysis
Pricing Analysis
Sales Trends
Description
Enter, Process, Track Orders
Identify Customers & Markets
Determine Prices
Prepare 5-year Forecasts
Organizational Level
Operational
Knowledge
Management
Strategic
Manufacturing
System
Machine Control
Computer-aided-design
Production Planning
Facilities Location
Description
Organizational Level
Control Actions Of Equipment
Operational
Design New Products
Knowledge
Decide Number, Schedule Products
Management
Decide Where To Locate Facilities
Strategic
Examples of Systems by Functional Areas
Finance/Accounting
System
Accounts Receivable
Portfolio Analysis
Budgeting
Profit Planning
Description
Track Money Owed To Firm
Design Firm's Investments
Prepare Short Term Budgets
Plan Long-term Profits
Organizational Level
Operational
Knowledge
Management
Strategic
Human Resources
System
Training/Development
Career Pathing
Compensation Analysis
HR Planning
Description
Organizational Level
Track Training, Skills, Appraisals
Operational
Design Employee Career Paths
Knowledge
Monitor Wages, Salaries, Benefits
Management
Plan Long-term Labor Force Needs
Strategic
An Emerging Sales/Marketing System
 Given the proliferation of companies (from
our discussion in Session 1), keeping and
retaining customers is becoming more
crucial
 To help keep track of customers, companies
are turning to customer relationship
management (CRM) software
– Coordinates all of the business processes for
dealing with customers
© Andrew Schwarz, 2002
Slide 28
Question #3:
How do organizations integrate
all of the systems?
© Andrew Schwarz, 2002
Slide 29
Are These Systems Separate?
In the discussion thus far, we have treated the
systems as being separate from one another
Manufacturing
Accounting
Finance
Marketing/Sales
HR
Business
processes
Business
processes
Business
processes
Business
processes
Business
processes
Manufacturing
Systems
Accounting
Systems
Finance
Systems
Marketing/Sales
Systems
HR
Systems
Traditional Views of Systems
 Reality check: systems are (and need to be!)
integrated
 So how do companies integrate systems?
– Build their own patches
– Use enterprise systems, or firm-wide
information systems that integrate key business
processes so that information can flow freely
between parts of the firm [also known as ERP,
or Enterprise Resource Planning systems]
© Andrew Schwarz, 2002
Slide 31
Enterprise View of Systems
Manufacturing
Accounting
Business Processes
Vendors
Enterprise-wide
Business Processes
Human
Resources
Sales &
Marketing
Finance
Customers
Why would Firms use an ERP?
1.
2.
3.
4.
5.
Creation of one unified organization—no more
stovepipes
Automation of manually-intensive processes
Better reporting and decision making—
knowledge is in the hands of the knowledge
workers
Unified technology platform
More efficient company and customer driven
business
© Andrew Schwarz, 2002
Slide 33
Why do Firms Not Use an ERP?
1. High up-front cost
2. Challenge of implementation
1. Only 10-15% of implementations are smooth
3. Systems are inflexible—they define the
processes and your organization must
change how you do work
4. Tough to find the strategic value
© Andrew Schwarz, 2002
Slide 34
Question #4:
What is the application of this
lecture for you, as a manager, in
the digital age?
© Andrew Schwarz, 2002
Slide 35
Top 3 Applications From This Lecture
1. Are there processes in your organization
that need to be automated?
2. Are you thinking at the strategy level for
technology—do you see areas where
technology could help your firm grow?
3. How integrated are your systems? Are
your tasks repetitious (do you have to reenter data already in another system?)?
© Andrew Schwarz, 2002
Slide 36