Reading notes for chapter 3 in the textbook.

Read Section 3.1 leisurely. It is on the organizations and the information systems. 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.

Reading notes for chapter 3 in the textbook - Continued

Section 3.4 is on the strategic use of information technology to gain competitive 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 in significant competitive advantages. This section deserves careful attention.

Chapter 3: Information Systems,

Organizations, Management and Strategy

Organizations And Information Technology

Mediating Factors

organizations

Environment Culture Structure Standard procedures Business process Politics Management Decisions Chance

Information Technology

FORMAL ORGANIZATION Structure Hierarchy division of labor Rules,procedures Business processes Process Rights/obligations Privileges/responsibilities Values Norms People

Environmental resources

Environmental outputs

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 of time 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.

STRUCTURAL CHARACTERISTICS OF ALL ORGANIZATIONS

Clear division of labor Hierarchy Explicit rules and procedures Impartial judgments Technical qualifications for positions Maximum organizational efficiency

ORGANIZATIONAL STRUCTURES

Organization- Description Example al Type Entrepreneurial Young, small firm in a fast-changing Small start structure environment. It has a simple structure and is business managed by an entrepreneur serving as its single chief executive officer. Machine bureaucracy

Large bureaucracy existing in a slowly changing Midsize environment, producing standard products. It is manufactur dominated by a centralized management team firm and centralized decision making.

Divisionalized bureaucracy

Combination of multiple machine bureaucracies, Fortune 50 each producing a different product or service, all firms such toped by one central headquarters. general mo

ORGANIZATIONAL STRUCTURES
Organization- Description al Type Professional Knowledge-based organization where bureaucracy goods and services depend on the expertise and knowledge of professionals. Dominated by department heads with weak centralized authority. Adhocracy Task force organization that must re to rapidly changing environments. Consists of large groups of specialists organized into short-lived multidisciplinary teams and has weak central management. Example

Law firms, school syste hospitals

Consulting such as the corporation

Summary of salient features of organizations

Common Features
Formal Structure Standard operating procedures(SOPs) Politics Culture

Unique features
Organizational type Environments Goals Power Constituencies Function Leadership Tasks Technology Business processes

Information Systems department The Formal organizational unit that is responsible for the information systems function in the organization. Programmers Highly 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 the information 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. End users Representatives of departments outside the information systems group for whom applications are developed.

THE ORGANIZATION Senior management Major end users(divisions) Information Systems department IT Infrastructure Hardware Software Data storage Networks Information Systems Specialists CIO Managers Systems analysts Systems designers Programmers Network specialists Database administrator Clerical

How Information Systems Affect the Organizations

Microeconomic model of thee firm

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

Transaction cost theory

Economic 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 theory
Economic theory that views the firm as a nexus of contracts among self-interested individuals who must be supervised and managed.

Virtual organization
Organization 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.

Organizational Components and Change

TASK

TECHNOLOGY

PEOPLE

STRUCTURE

Managers and Decision-Making

Classical model of management

Traditional description of management that focused on its formal functions of planning, organizing, coordinating, deciding and controlling.
Behavioral models Descriptions of management based on behavioral scientists observations of what managers actually do in their jobs.

Managerial Roles in Behavioral Model

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 and negotiate conflicts.

The Process of Decision-Making

Strategic 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.

Types of Decisions
Unstructured decisions Non-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.

Organizational level
Operational knowledge management Strategic

Type of decision

Structured

TPS Office systems MIS

Semistructured

DSS

KWS

U nstructured

ESS

Individual Models of Decision-Making

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.

Organizational Models of Decision-Making

Bureaucratic models of decision making Models of decision making where decisions are shaped by the organizations standard operating procedures(SOPs).

Political models of decision making Models of decision making where decisions result from competition and bargaining 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.

What is Business Strategy?

Organization has a limited set of resources (e.g. time, people, money, physical resources) and they must decide how 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 it will use use its resources

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!

Strategy vs. Tactic

Strategy focuses essentially on deciding on what the organization is trying to do, what it is trying to become within its business environment. Changing strategy is difficult 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.

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 the implementation of the strategy.

Elements of Strategic Management

Long range planning Responsive management Innovation

Vision

Mission

Strategic

Managerial Operational Information Technology

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

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,...

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 lockin, customer lock-out, new business entry

STRATEGY LEVELS AND INFORMATION TECHNOLOGY (IT) - ANOTHER FRAMEWORK

STRATEGIES MODELS IT TECHNIQUES

INDUSTRY cooperation vs. competition Competitive forces electronic transactions licensing Network economics communications networks Inter-organizational systems standards information partnership FIRM Synergy knowledge systems Core competency Core competencies organizational systems BUSINESS Low Cost producer Differentiation of products/services Scope of competition (global vs. niche)

Value chain analysis data mining IT-based products / services Inter-organizational systems supply chain management efficient customer response

Value Chain Analysis

Highlights the primary and support activities that add a margin of value to a firms product/service where IS can best be applied to achieve a competitive advantage. Primary activities: Activities most directly related to the production and distribution of a firms products/services Consist of inbound logistics, operations, outbound logistics, sales and marketing, service Support activities: Activities that make the delivery of primary activities possible Consist of organizations infrastructure, human resources, technology, procurement

The Value Chain for a Restaurant

Each box represents a primary process

IS to Support Product/Service Differentiation

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

IS to Support Niche Focus

Focused differentiation strategy for developing new market niches for specialized products/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.

 Supply chain management

IS to Support Low Cost Strategy

integrates supplier, distributors, and customer logistics requirements 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 expenditure of resources when changing from one supplier to a competing supplier e.g. Baxter Healthcares stockless inventory

Business Level Strategy

Business Level Strategy

The Business Firm

Vendors

Customers

Supply Chain Management Stockless Inventory Continous Replenishment Just-in-time delivery

Intra Firm Strategy Product differentiation Focused differentiation Low-cost producer

Efficient Customer Response Point-of-sale systems Datamining

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

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

COMPETITIVE FORCES MODEL

NEW MARKET ENTRANTS SUBSTITUTE PRODUCTS & SERVICES

THE FIRM

TRADITIONAL COMPETITION

Bargaining power of SUPPLIERS

Bargaining power of CUSTOMERS

Managing Strategic Transitions

A movement from one level of sociotechnical system to another. Often required when adopting strategic systems that demand changes in the social and technical elements of an organization.

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 information systems technology Kinds of systems are applicable to the Being behind or ahead of the industry in its application of information systems The current business strategic plan, and the current strategy for information services Sufficient technology and capital to develop a strategic information systems initiative The greatest value to the firm

Challenges
Integrations Sustainability of competitive advantage