chapter eighteen

Using Advanced Information Technology to Increase Performance

McGraw-Hill/Irwin Contemporary Management, 5/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Differentiate between data and information, and list the attributes of useful information Describe three reasons why managers must have access to information to perform their tasks and roles effectively. Describe the computer hardware and software innovations that have created the IT revolution.

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Learning Objectives
Differentiate among seven different kinds of management information systems. Explain why managers are using IT to build strategic alliances and network structures to increase efficiency and effectiveness

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Information and the Managers Job

Data
Raw, unsummarized, and unanalyzed facts.

Information
Data that are organized in a meaningful fashion

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Attributes of Useful Information

Attributes
Quality The accuracy and reliability of available information affects the quality of decisions that managers make using the information. The availability of real-time information that reflects current conditions allows managers to maximize the effectiveness of their decisions. Complete information allows managers to consider all relevant factors when making decisions. Having information specific to a situation assists managers in making better decisions.

Timelessness

Completeness

Relevance

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Discussion Question
Which factor is most important in affecting the usefulness of information? A. Quality B. Timeliness C. Relevance D. Completeness

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Factors Affecting the Usefulness of Information

Figure 18.1

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What is Information Technology?

Information Technology set of methods or techniques for acquiring, organizing, storing, manipulating, and transmitting information

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Question?
What is the specific form of IT that managers utilize to generate the detailed information they need to perform their roles effectively? A. Management information system B. Decision support system C. Decision information system D. Management support system
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What is Information Technology?

Management Information System specific form of IT that managers utilize to generate the specific, detailed information they need to perform their roles effectively

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What is Information Technology?

Managers need information for three reasons:
1. To make effective decisions 2. To control the activities of the organization 3. To coordinate the activities of the organization

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Information and Decisions

Most of management is about making decisions To make effective decisions, managers need information, both from inside and outside the organization

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Information and Control

Managers achieve control by: 1. Establishing measurable goals 2. Measuring actual performance 3. Comparing actual performance with goals 4. Taking any corrective action

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Information and Coordination

Coordination problems that managers face in managing global supply chains are increasing Managers have adopted sophisticated IT that helps them coordinate the flow of materials, semifinished goods, and finished goods throughout the world

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The Effects of Advancing IT

IT revolution began with the development of the first computers Modern computers can read, process, and store billions of instructions per second This power forms the foundation of the ongoing IT revolution

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The Effects of Advancing IT

Products resulting from advancing IT
Powerful microprocessors and PCs, highbandwidth wireless smart phones, sophisticated word-processing software, expanding computer networks, inexpensive digital cameras, useful online information and retailing services

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The Effects of Advancing IT

IT helps create new product opportunities that managers and their organizations can take advantage of IT creates new and improved products that reduce or destroy demand for older, established products

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IT and the Product Life Cycle

Product Life Cycle
Refers to the way in which the demand for a product changes in a predictable way over time

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A Product Life Cycle

Figure 18.2

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A Product Life Cycle

Embryonic stage
Product has yet to gain widespread acceptance Customers are unsure what a product has to offer

Growth stage
Many consumers are buying the product for the first time Demand increases rapidly
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A Product Life Cycle

Mature stage
Market peaks because most customers have already bought the product Demand is typically replacement demand

Decline stage
Advancing IT leads to the development of a more advanced product making the old one obsolete

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A Product Life Cycle

Advances in IT are one of the most important determinants of the length of a products life cycle The shorter the length of a products life cycle because of advancing IT the more important it is to innovate products quickly and continuously

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Types of Management Information Systems

Computer Networks
Networking The exchange of information through a group or network of interlinked computers Servers are powerful computers that relay information to client computers connected on a Local Area Network (LAN). Mainframes are large computers processing vast amounts of information . The Internet is a world wide network of computers.
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A Typical Four-Tier Information System

Figure 18.3

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Types of Management Information Systems

Operating system software
software that tells computer hardware how to run

Applications software
software designed for a specific task or use

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Six Computer-Based Management Information Systems

Figure 18.4

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The Organizational Hierarchy

Traditionally, managers have used the organizational hierarchy as the main system for gathering information necessary to make decisions and coordinate and control activities

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The Organizational Hierarchy

Drawbacks Can reduce timeliness of information Reduces quality of information Tall structure can make for an expensive information system

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Types of Information Systems

Transaction Processing Systems
Systems designed to handle large volumes of routine transactions. Were the first computer-based information systems handling billing, payroll, and supplier payments.

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Types of Information Systems

Operations Information Systems
Systems that gather, organize, and summarize comprehensive data in a form of value to managers. Can help managers with non-routine decisions such as customer service and productivity.

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Types of Information Systems

Decision Support Systems
Provides computer-built models that help managers make better nonprogrammed decisions. New productive capacity, new product development, launch a new promotional campaign, enter a new market or expand internationally

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Types of Information Systems

Executive Support System
Sophisticated version of a decision support system designed to meet the needs of top managers

Group Decision Support System

An executive support system that links top managers so that they can function as a team.

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Expert Systems and Artificial Intelligence

Artificial Intelligence
Behavior by a machine that, if performed by a human being, would be called intelligent Already possible to write programs that can solve problems and perform simple tasks

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Expert Systems and Artificial Intelligence

Expert Systems
Most advanced management information systems available System that employs human knowledge, embedded in computer software, to solve problems that ordinarily require human expertise

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Enterprise Resource Planning Systems

Enterprise Resource Planning Systems
multi-module application software packages that allow a company to link and coordinate the entire set of functional activities and operations necessary to move products from the initial product design stage to the final customer stage

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Enterprise Resource Planning Systems

1. Help each individual function improve its functional-level skills 2. Improve integration among all functions so that they work together to build a competitive advantage for the company

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Types of Information Systems

E-Commerce Systems
Trade that takes place between companies, and between companies and individual customers, using IT and the Internet

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Types of E-Commerce

Figure 18.5

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E-Commerce Systems
Business-to-business (B2B)
trade that takes place between companies using IT and the Internet to link and coordinate the value chains of different companies

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E-Commerce Systems
B2B marketplace
Internet-based trading platform set up to connect buyers and sellers in an industry

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Types of E-Commerce
Business-tocustomer (B2C)
trade that takes place between a company and individual customers using IT and the Internet

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Strategic Alliances, B2B Network Structures, and IT

Strategic Alliances
formal agreement that commits two or more companies to exchange or share their resources in order to produce and market a product

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Strategic Alliances, B2B Network Structures, and IT

B2B network structure
formal series of global strategic alliances that one or several organizations create with suppliers, manufacturers, and/or distributors to produce and market a product

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How Computer-Based Information Systems Affect the Organizational Hierarchy

Figure 18.6

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The Impact and Limitations of Information Systems

Horizontal Information Flows
Information networks can bridge functional departments which allows information to flow horizontally between departments, leading to much higher productivity, quality, and innovation.

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Communication Flows at Tel Co. and Soft Co.

Figure 18.7

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Question?
What is composed of people linked by IT who rarely see one another face-toface? A. Knowledge workers B. Boundaryless organization C. Limitless firm D. Web 2.0 organization

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Boundaryless Organization
Boundaryless Organization
composed of people linked by IT who rarely see one another face-to-face functional experts who form an alliance with an organization

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Boundaryless Organization
Knowledge management system
company-specific virtual information system that systematizes the knowledge of its employees and facilitates the sharing and integrating of expertise within and between functions and divisions through real-time, interconnected IT

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Limitations of Information Systems

Loss of the Human Element
Information systems cannot present all kinds of information accurately. Thick information, which is rich in meaning and not quantifiable, is best suited to human analysis. Information systems should support faceto-face communication, and not be expected to replace it
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Limitations of Information Systems

Causes of Difficult Implementations
Information systems can be hard to develop and put into service. Consistent standards for systems do not exist. Makers of hardware use different standards which makes it hard to share information between systems.

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Limitations of Information Systems

To avoid problems:
List major organization goals and the information types require measure those goals. Audit the current system to verify that information collected is accurate, reliable, timely, and relevant. Investigate other sources of information Build support for the system with workers. Create formal training programs. Emphasize that face-to-face contact is important.

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Movie Example: Las Vegas

When is it necessary to change technology that is functional?

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