Mis Chap 1

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Management Information Systems: Managing

Learning Objectives
the Digital Firm
Sixteenth Edition 1 Define an information system and describe its components.
What is an IS ? How does it work? What are its management,

organization, and technology components?
Chapter 1 2 Understand the effects of information systems on business
Information How are IS transforming business, and why are they so essential for
running and managing a business today?
Systems in Global
Business Today 3 Explain what is meant by a sociotechnical systems perspective
What academic disciplines are used to study IS, and how does each
contribute to an understanding of information systems?
Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
Characteristics of Digital Age Information Concepts

• DATA: Raw facts with no precise context or meaning
 Transition from Industrial to Information Society
• INFORMATION: refined, organized, meaningful, and useful data.
 Explosion of data: 90% of data has been created in the last 2 years To become an information, data is processed by summing,
 Information as the primary driver of the economy ordering, averaging, grouping, comparing, etc.
 Ubiquitous Availability of Data: time shifting and space shifting. • KNOWLEDGE: A contextual information based on expert insight
 Internet and technology innovations: Cloud, Big Data, IoT, AI, VR,
and experience-based intuition. It originates in the minds of
people and their ability to compare situations, problems, and
Quantum Computers, Blockchain, etc.
solutions. It allows predictions, unlike information which simply
gives us the facts.
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Figure 1.3 Data and Information

Types of Data
The Characteristics of Valuable Information What Is an Information System?

• Relevant: directly related to the subject, addresses specific questions and • From a Technical perspective:
contribute to a better understanding of the topic.
 Components that work together to process data and produce information.
• Complete: provides all the necessary details and context.
 Collects, stores, and disseminates Information.
• Accurate: error free, provides a true representation of the facts or reality.
 Transform raw data into useful Information through three basic activities:
• Timely: up-to-date, delivered when needed. Input, Processing and Output
• Economical: it’s value is bigger than it’s cost • From a Business perspective
• Reliable: can be trusted, obtained from credible sources.  An IS uses information from firm external environment and internal
operations to support organizational functions and help managers solve
• Accessible: we can retrieve it easily and in the right format when needed
problems and make decisions and provides real economic value to the
• Useful: practical and serves a purpose (decision-making, problem-solving) business.
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The components of an Information The components of an IS

• Hardware: computer equipment used to manage information
System
• Software: computer programs that govern the hardware
• Database: with a database, the collected data is stored and

organized. Examples of databases include employee records and
product catalogues.
• Telecommunications, networks, and the Internet
• People: The most important element in an IS
• Procedures: strategies, policies, methods, and rules for using the

IS
How are IS transforming business ? What makes IS so essential today?

• Firms are investing in IS because their ability to survive, to build a
– New businesses and industries appear, old ones decline
competitive advantage and achieve strategic business goals are difficult
– E-commerce continue to expand
without extensive use of information technology.
– Sources of business value are shifting from products to solutions
• The main strategic business objectives driving the use of IS and
– Firms are increasingly using social media to engage customers,
technologies are:
discover trends, build brand awareness, respond to customer requests
1. Operational excellence
– Firms are increasingly using online platforms and applications (google
docs, Microsoft sharepoint, blogs) to support communication, 2. New products, services, and business models
collaboration and information sharing. 3. Customer and supplier intimacy
– Firms try to become more flexible, reactive and efficient by digitally 4. Improved decision making
enabling their core business processes and evolving into digital firms 5. Competitive advantage
6. Survival
– .
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1. Operational Excellence 1. Operational Excellence

• Operational excellence refers to achieving higher degrees of • Automating inventory systems helps in minimizing excess stock,
efficiency of business operations. It may refer to how well a firm: preventing stockouts, and reducing warehouse overhead costs.
• Does things better than competitors or better than previously done • Automating ordering systems can improve the exchange of information,
and real-time updates reducing delays and errors.
• Minimizes waste, repetition and errors
• Automating quality control checks and real-time data analysis can help
• Identifies and solves problems quickly
identify and rectify issues promptly.
• Continually improves the way things are done
• Example: Walmart’s RetailLink system links suppliers to stores for superior
• Maximizes productivity, etc. replenishment system. As soon as a customer purchases an item, the
supplier monitoring the item knows to ship a replacement to the shelf.
2. New Products, Services, and Business 2. New Products, Services, and Business
Models Models
• IS enable managers to create new products, new services and even • The value of a business model lies in the software interface, not only in
entirely new business models. the product itself.
• Business model and business plan are two different concepts • Technology developments have a profound impact on shaping and
transforming business models. New business models emerge and firms
• A Business plan is a comprehensive document that outlines the goals,
can redesign their models to capitalize on increased efficiency, reduce
strategies, operations, and financial forecasts of a business.
operational costs, and allocate resources more strategically. Ex: the shift
• A Business model describes how a company produces, delivers, and from the “brick and mortar” model to the online marketplace model (Uber,
sells a products or a service. Lyft, Fiverr) or to the online retailer model (Alibaba, Amazon).
• The shift from the purchase model to the transaction/rental model (Netflix,
Airbnb, cloud computing…)
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3. Customer and Supplier Intimacy Example: Shortening Lines at Disney World

• Firms that integrate IS and technologies to their activities create customer
and supplier intimacy. Many hotels use IS to track and analyze cusomer • In Disney World, long lines limit how many rides, shops, and
preferences and use this data to increase customer satisfaction (eg: giving restaurants a customer can visit, which may have a direct impact on
profitable customers additional privileges like late checkouts, customized Disney’s profit.
rooms, etc..)
• To cope with this problem, Disney uses information systems to spot
• IS enhances the shopping experience. In an online retailer website, buyers congestion and improve crowd flow.
can select a particular product display based on best-selling items, price
• Disney has used operational command center video cameras, digital
range and customer ratings.
maps, computer programs, and mobile apps to monitor attendance,
• IS allow businesses to share real time date with suppliers so they can registers, and spot and prevent congestion. This will eventually
determine the inventory needed, reorder with their suppliers, track and Enhance customer satisfaction and spending.
receive shipments in a timely way which results in lowering costs.
4. Improved Decision Making (2 of 2)

4. Improved Decision Making (1 of 2)
• IS can provide real-time monitoring of key performance indicators (KPIs)
• Without accurate information: and generate insightful reports. This allows firms to make informed
decisions promptly and adapt to changing conditions.
– Managers must use forecasts, best guesses or luck
– Results in: • Managers can use the IS to run different scenarios. For each scenario,
the system can calculate key indicators for different alternatives.
 Overproduction, underproduction
• Verizon Corporation, a large telecommunication company in US, uses a
 Misallocation of resources
digital dashboard to provide managers with real-time information on
 Poor response times customer complaints, network performance for each locality, and line
outages or storm-damaged lines. Using this information, managers can
 Poor outcomes raise costs, lose customers
immediately allocate repair resources to affected areas, inform consumers
of repair efforts, and restore service fast.
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5. Competitive Advantage
6. Survival
• Michael Porter presents 3 competitive strategies: cost leadership,
differentiation and focus niche. • Industry-wide shifts, such as changes in consumer expectations or
emerging technologies, can drive the adoption of IS as a necessity.
• A well-established IS could give a company a cost advantage over
competitors or be a source of differentiation by offering better customer • As more and more companies are turning to IS to solve their problems
service. Examples: With the help of a substantial investment in just in and to come up with new and innovative ideas, other companies have no
time IS, Toyota was able to achieve high efficiency and quality. Now it choice but to join the bandwagon in order to survive. They are compelled
can offer excellent quality vehicles at a reasonable price to its customers. to embrace similar technologies to keep pace with industry leaders.
• Sophisticated software tools support focus niche strategy by producing • Changes in regulations related to data protection, privacy, and
and analyzing data from many sources to understand customer buying cybersecurity often require the adoption of specific IS solutions.
patterns, tastes, and preferences. This data is used to pitch advertising Companies must comply with these regulations to avoid legal and
and marketing campaigns to smaller target markets. reputational risks.
Dimensions of Information Systems 1. The Organization

• IS are more than just computers. To fully understand IS and using them • IS are part of a broader organization.
effectively, managers should understand the broader organization,
• The organization is a combination of key factors which are people,
management, and technology dimensions shaping the systems. We refer
structure, business processes, politics, and culture.
to this broader understanding of these 3 dimensions, as information
systems literacy. • All of these key elements define the nature and scope of IS.
• How business processes are performed ? What is the impact of culture

and politics ? How people are arranged to perform their tasks
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1.1. People 1.2. Structure

• People work in different management levels. • Each management levels is further divided into functional areas (Sales
and marketing, Human resources, Finance and accounting, Manufacturing
• People at each level perform different tasks, have different information
and production…)
needs and are involved in different types of decison making.
• For every functional area in every management level, a different IS is
• At each level, people need a specific type of IS. Senior managers, for
required to fulfill the unique information requirement.
example, need an IS that deals with unstructured decisions and
summarized reports.
1.3. Business Processes 1.4. Culture and Politics

• Every organization has unique business processes. A business process is
a set of rules that define how specific business tasks are performed. Each • Each firm has a unique culture, a set of core assumptions, values, and
major function has its own set of business, however there are many ways of doing things that are accepted by most of its members.
business processes which are cross-functional such as order fulfilment. • IS must be customized to adjust the firm culture. Any new IS that threatens
• IS can help firms achieve great efficiencies by automating parts of these commonly held cultural assumptions usually meets a great resistance.
processes or by helping firms redesign and reorganize them. Unique IS • People in organizations have different interests, opinions and agendas.
are required to perform such business processes These views often conflict over how the company should be run and how
resources and rewards should be distributed. This political struggle is the
basis for organizational politics.
• IS come out of this cauldron of differing perspectives, conflicts,

compromises, and agreements that are a natural part of all organizations.
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2. The Management 3. The Technology

• Managers decide the organizational strategy and can create new
• Technology infrastructure is the real foundation of any IS
products and services
• Technology infrastructure sets the scope and physical limits of IS.
• They can sometimes re-create the organization to run it in entire different
way • If the required technology infrastructure is not available, then the
implementation of an IS is not possible. For example, a slow internet
• The selection and the scope of IS are entirely based on information
connection will not support quick analytical processing so delaying the
requirements identified by managers
decision making.
• Even an IS with much capabilities is not a workable solution if managers
are not willing to accept it.
It Isn’t Just Technology: A Business

Perspective on Information Systems
• From a business perspective, IS are part of a series of value-adding
activities for acquiring, transforming, and distributing information that
managers can use to improve decision making, enhance organizational
performance, and, ultimately, increase firm profitability.
• Business information value chain
– Raw data acquired and transformed through stages that add value
to that information
– The value of information system is determined in part by the extent

to which it leads to better decisions, greater efficiency, and higher
profits
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It Isn’t Just Technology: A Business It Isn’t Just Technology: A Business Perspective

Perspective on Information Systems on Information Systems (4 of 3)
• Complementary assets include
• The business perspective calls attention to organizational and managerial
• Organizational assets
nature of IS.
 Supportive culture that values efficiency and effectiveness
• Investing in IT does not guarantee good returns. Firms must also support
 Appropriate business model
their technology investments with appropriate changes in organization
 Efficient business processes
and management. These investments are called complementary assets.
 Decentralized authority
• Complementary assets are those required to derive value from a primary • Managerial assets
investment. Value must be added through complementary assets such as  Strong senior management support for technology investment and
new business processes, management behavior, organizational culture, change
and training. E.g.: invest in technology and the people to make it work  Incentives for management innovation
properly.  Teamwork and collaborative work environments

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1/24/2024

Management Information Systems: Managing

What is an IS ? How does it work? What are its management,

Chapter 1 2 Understand the effects of information systems on business

Characteristics of Digital Age Information Concepts

Figure 1.3 Data and Information

The Characteristics of Valuable Information What Is an Information System?

The components of an Information The components of an IS

• Database: with a database, the collected data is stored and

• Telecommunications, networks, and the Internet

• People: The most important element in an IS

• Procedures: strategies, policies, methods, and rules for using the

How are IS transforming business ? What makes IS so essential today?

collaboration and information sharing. 3. Customer and supplier intimacy

1. Operational Excellence 1. Operational Excellence

3. Customer and Supplier Intimacy Example: Shortening Lines at Disney World

4. Improved Decision Making (2 of 2)

Dimensions of Information Systems 1. The Organization

• How business processes are performed ? What is the impact of culture

1.1. People 1.2. Structure

1.3. Business Processes 1.4. Culture and Politics

• IS come out of this cauldron of differing perspectives, conflicts,

2. The Management 3. The Technology

It Isn’t Just Technology: A Business

• Business information value chain

– The value of information system is determined in part by the extent

It Isn’t Just Technology: A Business It Isn’t Just Technology: A Business Perspective

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