Management Information Systems:

Managing the Digital Firm

Sixteenth Edition

Chapter 1
MANAGEMENT
INFORMATION Information Systems in Global
SYSTEMS Business Today

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Learning Objectives
1.1 How are information systems transforming business,
and why are they so essential for running and managing
a business today?
1.2 What is an information system? How does it work?
What are its management, organization, and technology
components? Why are complementary assets essential
for ensuring that information systems provide genuine
value for organizations?
1.3 What academic disciplines are used to study
information systems, and how does each contribute to
an understanding of information systems?

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PCL Construction: The New Digital
Firm (1 of 2)
• Business Challenges
- Widespread operations
- Paper intensive processes
• Solutions
- Mobile devices
- Touch screen kiosks
- Microsoft Azure Cloud
- Virtual design and project management
- Analytics dashboard

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PCL Construction: The New Digital
Firm (2 of 2)
• Illustrates how information technology has changed
how PCL runs its business
• Demonstrates I T’s role in redesigning jobs and
business processes
• Illustrates the potential for technology to improve
operational efficiency and customer experience

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How Information Systems Are
Transforming Business (1 of 2)
• In 2017, more than 140 million businesses had dot-com
addresses registered
• 273 million adult Americans online; 190 million
purchased online
• 269 million Americans have mobile phones
• 200 million use social networks

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How Information Systems Are
Transforming Business (2 of 2)
• Social networking tools being used by businesses to
connect employees, customers, and managers
• Internet advertising continues to grow at more than 20
percent per year
• New laws require businesses to store more data for
longer periods
• Changes in business result in changes in jobs and careers

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https://www.mckinsey.com/business-functions/strategy-and-corporate-
finance/our-insights/how-covid-19-has-pushed-companies-over-the-
technology-tipping-point-and-transformed-business-forever

https://twitter.com/YahooFinance/status/1439607949891194884
Figure 1.1 Information Technology
Capital Investment

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What’s New in Management
Information Systems (1 of 3)
• IT Innovations
- Cloud computing, big data, Internet of Things
- Mobile digital platform
- AI and machine learning
• New Business Models
- Online streaming music and video
- On-demand e-commerce services

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What’s New in Management
Information Systems (2 of 3)
• E-commerce Expansion
- E-commerce expands to nearly $1 trillion in 2018
- Online services now approach online retail in revenue
-Netflix now has more than 125 million subscribers
- Online mobile advertising now larger than desktop
• Management Changes
- Managers use social networks, collaboration tools
- Business intelligence applications accelerate
- Virtual meetings proliferate

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What’s New in Management
Information Systems (3 of 3)
• Firms and Organizations Change
- More collaborative, less emphasis on hierarchy and
structure
- Higher-speed/more accurate decision making based on
data and analysis
- More willingness to interact with consumers (social
media)
- Better understanding of the importance of I T

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Globalization Challenges and
Opportunities: A Flattened World
(1 of 2)

• Internet and global communications have greatly changed

how and where business is done
- Drastic reduction of costs of operating and transacting
on global scale
- Competition for jobs, markets, resources, ideas
- Growing interdependence of global economies

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Globalization Challenges and
Opportunities: A Flattened World
(2 of 2)

- Requires new understandings of skills, markets,

opportunities
- Challenges yes, but opportunities as well
- Over half of the revenue of S&P 500 US firms is
generated off shore
- Information systems enable globalization of commerce

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The Emerging Digital Firm
• In a fully digital firm:
- Significant business relationships are digitally enabled
and mediated
- Core business processes are accomplished through
digital networks
- Key corporate assets are managed digitally
• Digital firms offer greater flexibility in organization and
management
- Time shifting, space shifting

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Strategic Business Objectives of
Information Systems (1 of 2)
• Growing interdependence between:
- Ability to use information technology
- Ability to implement corporate strategies and achieve
corporate goals

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Strategic Business Objectives of
Information Systems (2 of 2)
• Firms invest heavily in information systems to achieve six
strategic business objectives:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

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Figure 1.2 The Interdependence
Between Organizations and
Information Systems

Hardware

Business Strategic
Objectives Business
Data Management
Processes

Business Information Telecommunications

Firm System

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Operational Excellence
•Information systems and technologies help improve
efficiency and productivity
• Improved efficiency results in higher profits

• Example: Walmart
- Power of combining information systems and best
business practices to achieve operational efficiency— and
over $485 billion in sales in 2017
- Most efficient retail store in world as result of digital
links between suppliers and stores

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New Products, Services, and
Business Models
• Information systems and technologies enable firms to
create new products, services, and business models
• Business model: how a company produces, delivers,
and sells its products and services
• Example: Apple
- Transformed old model of music distribution with
iTunes
- Constant innovations—iPod, iPhone, iPad, etc.

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Customer and Supplier Intimacy
• Customers who are served well become repeat
customers who purchase more
- Example: Mandarin Oriental Hotel
- Uses I T to foster an intimate relationship with its
customers, keeping track of preferences, etc.
• Close relationships with suppliers result in lower costs
- Examples: Mandarin Oriental Hotel and J C Penney (in
text)
- J C Penney uses I T to enhance relationship with
supplier in Hong Kong

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Improved Decision Making (1 of 2)
• Without accurate information:
- Managers must use forecasts, best guesses, luck
- Results in:
■ Overproduction, underproduction
■ Misallocation of resources
■ Poor response times

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Improved Decision Making (2 of 2)
• Poor outcomes raise costs, lose customers
• Real-time data improves ability of managers to
make decisions.
• Example: Verizon’s web-based digital dashboard to
provide managers with real-time data on customer
complaints, network performance, line outages, etc.

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Competitive Advantage
• Allow a company to produce goods or services better or
more cheaply than its rivals.
• More sales or superior margins compared to competitors
• Examples: Apple, Walmart, U P S are industry leaders
because they know how to use information systems for this
purpose

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Survival
• Businesses may need to invest in information systems
out of necessity; simply the cost of doing business
• Keeping up with competitors
- Citibank’s introduction of ATMs
• Federal and state regulations and reporting
requirements
- Toxic Substances Control Act and the Sarbanes-Oxley
Act

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What Is an Information System?
(1 of 3)
• Information technology: the hardware and software a
business uses to achieve objectives
• Information system: interrelated components that
manage information to:
- Support decision making and control

- Help with analysis, visualization, and product creation

•Information systems transforms data into information
Data: streams of raw facts
Information: data shaped into meaningful, useful form
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Figure 1.3 Data and Information

331 Brite Dish Soap 1.29 Sales Region: Northwest

863 BL Hill Coffee 4.69 Store: Superstore #122
173 Meow Cat .79
331 Brite Dish Soao 1.29
ustard Information ITEM NO. DESCRIPTION UNITS SOLD
663 Countr :r Ham 3.29 System 331 Brite Dish Soap 7,156
524 Fiery 1.49
113 Ginger yRoot .85 YTD SALES
Mi Soap
331 Brite Dish 1.29
$9,231.24

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Figure 1.4 Functions of an
Information System

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Dimensions of Information Systems

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Dimensions of Information Systems:
Organizations (1 of 2)
• Hierarchy of authority, responsibility
- Senior management
- Middle management
- Operational management
- Knowledge workers
- Data workers
- Production or service workers

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Figure 1.6 Levels in a Firm

Senior
Management

Middle Management \
Scientists and knowledge
workers

Operational Management
Production and service workers Data
workers

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Dimensions of Information Systems:
Organizations (2 of 2)
• Business functions
- Sales and marketing
- Human resources
- Finance and accounting
- Manufacturing and production
• Unique business processes
• Unique business culture
•

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Dimensions of Information Systems:
Management
• Managers set organizational strategy for responding to
business challenges
• In addition, managers must act creatively
- Creation of new products and services
- Occasionally re-creating the organization

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Dimensions of Information Systems:
Technology
• Computer hardware and software
• Data management technology
• Networking and telecommunications technology
- Networks, the Internet, intranets and extranets, World
Wide Web
• IT infrastructure: provides platform that system is built
on

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Interactive Session: Technology: U P
S
Competes Globally with Information
Technology
• Class Discussion
- What are the inputs, processing, and outputs of U P S’s
package tracking system?
- What technologies are used by U P S? How are these
technologies related to U P S’s business strategy?
- What strategic business objectives do U P S’s
information systems address?
- What would happen if U P S’s information systems were
not available?

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Dimensions of U P S Tracking
System
• Organizational
- Procedures for tracking packages and managing
inventory and provide information
• Management
- Monitoring service levels and costs
• Technology
- Handheld computers, bar-code scanners, networks,
desktop computers, and so on

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It Isn’t Just Technology: A Business
Perspective on Information Systems
(1 of 3)

• Information system is instrument for creating value

• Investments in information technology will result in
superior returns
- Productivity increases
- Revenue increases
- Superior long-term strategic positioning

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It Isn’t Just Technology: A Business
Perspective on Information Systems
(2 of 3)

• Business information value chain

- Raw data acquired and transformed through stages that
add value to that information
- Value of information system determined in part by extent
to which it leads to better decisions, greater efficiency, and
higher profits
• Business perspective
- Calls attention to organizational and managerial nature
of information systems
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Figure 1.7 The Business Information
Value Chain

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It Isn’t Just Technology: A Business
Perspective on Information Systems
(3 of 3)

• Investing in information technology does not guarantee

good returns
• There is considerable variation in the returns firms
receive from systems investments
• Factors
- Adopting the right business model
- Investing in complementary assets (organizational and
management capital)

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Figure 1.8 Variation in Returns on
Information Technology

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Complementary Assets:
Organizational Capital and the Right
Business Model (1 of 2)
• Assets required to derive value from a primary
investment
• Firms supporting technology investments with
investment in complementary assets receive superior
•
returns •

Example: Invest in technology and the people to make it

work properly

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Complementary Assets:
Organizational Capital and the Right
Business Model (2 of 2)
• Complementary assets
- Examples of organizational assets
■ Appropriate business model
■ Efficient business processes
- Examples of managerial assets
■ Incentives for management innovation
■ Teamwork and collaborative work environments
- Examples of social assets
■ The Internet and telecommunications infrastructure
■ Technology standards
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Figure 1.9 Contemporary Approaches
to Information Systems
Technical
Approaches Computer Operations
Science Research

Management
MIS Sociology
Science

Psychology Economics Behavioral

Approaches

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Technical Approach
• Emphasizes mathematically based models
• Computer science, management science,
operations research

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Behavioral Approach
• Behavioral issues (strategic business
integration, implementation, etc.)
• Psychology, economics, sociology

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Approach of This Text:
Sociotechnical Systems (1 of 2)
• Management information systems
- Combine computer science, management science,
operations research, and practical orientation with
behavioral issues
• Four main actors
- Suppliers of hardware and software
- Business firms
- Managers and employees
- Firm’s environment (legal, social, cultural context)

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Approach of This Text:
Sociotechnical Systems (2 of 2)
• Sociotechnical view
- Optimal organizational performance achieved by jointly
optimizing both social and technical systems used in
production
- Helps avoid purely technological approach

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Figure 1.10 A Sociotechnical
Perspective on Information Systems

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