Strategic Role

“Understanding Information Technology (IT) is vital to

every manager simply because IT is part of every
manager's job. Managers in the 1990s must use IT to
leverage their contributions to the organisation, and they
must be knowledgeable about IT so that they can lead
others to do the same.”
Professor Richard L. Nolan, Harvard Business School

This is probably not at all controversial by 2008

(well, apart from the verb “to leverage”!)
Strategic Role of Information Systems
• Strategic Information System

• Can Change:
– Goals, Operations
– Products, Services
– Environment

• To Gain Competitive Advantage

 Changing Concepts of IS

Time Conception of Information

period information system Purpose

1950-1960 Bureaucratic requirement Electronic Speed accounting &

Accounting Paper processing
1960s-1970s General purpose support MIS Speed general Reporting
requirements
1970s-1980s Customized management DSS - ESS Improve, customize
support Decision making
1985-now Strategic resource
Strategic Promote survival and
Competitive advantage prosperity of
system
Business foundation organization
(example?)
 Business-level Strategy
• Product Differentiation
• Focused Differentiation
• Data-mining
• Supply Chain Management
• Efficient Customer Response
• Enhancing Core Competencies
 Strategy Levels & IT
Strategies Models IT technologies

Cooperation v competition Competitive forces model Electronic transactions

Industry Licensing Network economies Communications networks
Standards Interorganizational systems
Information partnerships

Firm Synergy Core competency Knowledge systems

Core competencies Organizational systems

Business Low cost Value chain analysis Datamining

Differentiation IT-based products / services
Scope Interorganizational systems
Supply chain management
Efficient customer response
 Competitive Forces Model
NEW SUBSTITUTE
MARKET PRODUCTS &
ENTRANTS SERVICES

TRADITIONAL
THE FIRM
COMPETITION

SUPPLIERS CUSTOMERS
 Countering Competitive Forces
• Product differentiation Developing new market niches for
• Focused differentiation specialized products/services where we
can beat the competition
• Link customers & suppliers
• Low-cost producer

• Use the Internet

– Though your competitors are now using it too...
– .. But not necessarily as smartly as you.
 Countering Competitive Forces
• Product Differentiation • RBC Centura

• Focused Differentiation • Hyatt Hotels TravelWeb

• Links to Customers and • Federal Express

Suppliers

• Low-cost Producer • Dell Computer *

• Low-cost Vendor • E-Buyer

*http://www1.us.dell.com/content/topics/global.aspx/corp/background/en/facts?
c=us&l=en&s=corp&~section=000&~ck=mn
 Types of Information System
KIND OF SYSTEM GROUPS SERVED
STRATEGIC LEVEL SENIOR MANAGERS
(DSS, ESS)

MANAGEMENT LEVEL MIDDLE MANAGERS

(MIS, DSS)

KNOWLEDGE LEVEL KNOWLEDGE &

(KWS) DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL (TPS) MANAGERS
SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN
MARKETING RESOURCES
 Major Types Of Systems
• Executive Support Systems (ESS)
• Decision Support Systems (DSS)
• Management Information Systems (MIS)
• Knowledge Work Systems (KWS)
• Office Automation Systems (OAS)
• Transaction Processing Systems (TPS or OLTP)
Transaction Processing Systems (TPS)
• Operational Level
• Inputs: Transactions, Events
• Processing: Updating
• Outputs: Business actions (and Detailed Reports)
• Users: Operations Personnel
Examples: Accounts Payable, Payroll, Order Entry
The following examples are taken from Laudon & Laudon

TPS
TPS
 Typical TPS Applications

Sales & Marketing Systems

Major System Functions: Major System Applications:

• Sales Management • Sales Order Info System

• Market Research • Market Research System
• Promotion • Pricing System
• Pricing
• New Products Typically run downstream of TPS

TPS
TPS
 Manufacturing & Production Systems
Major System Functions: Major System Applications:

• Scheduling • Materials
• Purchasing • Resource Planning Systems
• Shipping/Receiving • Purchase Order Control
• Engineering • Engineering Systems
• Operations • Quality Control

TPS
TPS
 Finance & Accounting Systems
Major System Functions: Major System Applications:

• Budgeting • General Ledger

• General Ledger • Accounts Receivable/Payable
• Billing • Budgeting
• Cost Accounting • Funds Management

TPS
TPS
 Human Resource Systems
Major System Functions: Major System Applications:

• Personnel Records • Payroll

• Benefits • Employee Records
• Compensation • Benefit Systems
• Labour Relations • Career Path Systems
• Training • Personnel Training Systems

TPS
TPS
 Others – e.g. University
Major System Functions: Major System Applications:

• Admissions  Registration System

• Grade Records  Student Transcript System
• Course Records • Curriculum Class Control
• Time-tabling  Scheduling
• Alumni relations • Alumni Benefactor System

TPS
TPS
 Knowledge Work Systems (KWS)
KNOWLEDGE LEVEL
• Inputs: Design Specs
• Processing: Modelling
• Outputs: Designs, Graphics
• Users: Technical Staff

Example:
ENGINEERING WORK STATION
 Office Automation Systems (OAS)
• Toward A “Paperless” Office*
• Redesign Of Work Flow
• Integrated Software
• Ergonomic Design
• Bright, Cheerful Work Space

Example: PRESENTATION GRAPHICS * No paper company

has suffered, though!
 Management Information Systems (MIS)
MANAGEMENT LEVEL
• Inputs: High Volume Data
• Processing: Simple Models
• Outputs: Summary Reports
• Users: Middle Managers

Example: ANNUAL BUDGETING

 Management Information Systems (MIS)
• Structured & Semi-structured Decisions
• Report Control Oriented
• Past & Present Data
• Internal Orientation
• Lengthy Design Process
 TPS Data for MIS Applications

TPS MIS
Order Processing SALES
DATA
System

ORDER FILE UNIT

PRODUCT
Materials Resource COST MIS REPORTS
Planning System
PRODUCT
CHANGE
PRODUCTION MASTER FILE
DATA
General Ledger
EXPENSE MANAGERS
System DATA

ACCOUNTING FILES MIS FILES

Source: Laudon & Laudon

 Decision Support Systems (DSS)
MANAGEMENT LEVEL
• Inputs: (usually) Low Volume Data
• Processing: Interactive
• Outputs: Decision Analysis
• Users: Professionals, Staff

Example: CONTRACT COST ANALYSIS

 Decision Support Systems (DSS)
• Flexible, Adaptable, Quick
• User Controls Inputs/outputs
• No Professional Programming
• Supports Decision Process
• Sophisticated Modeling Tools
 Executive Support Systems (ESS)
STRATEGIC LEVEL TOP LEVEL MANAGEMENT
• Inputs: Aggregate Data • Designed to the Individual
• Processing: Interactive • Ties CEO to All Levels
• Outputs: Projections • Very Expensive to Keep Up
• Users: Senior Managers • Extensive Support Staff

Example: 5 YEAR OPERATING

PLAN
Interrelationships Among Systems

ESS

MIS DSS

KWS
TPS
OAS