Information Systems in Organizations

Organizational culture and change

Organizational structure and decision
making
 Principles and Learning
Objectives
 The use of information systems to add value to
the organization is strongly influenced by
organizational structure, culture, and change
 Identify the value-added processes in the
supply chain and describe the role of
information systems within them
 Provide a clear definition of the terms
organizational structure, culture, and change
and discuss how they affect the
implementation of information systems
 Principles and Learning
Objectives (continued)
 Because information systems are so
important, businesses need to be sure
that improvements or completely new
systems help lower costs, increase profits,
improve service, or achieve a competitive
advantage
 Identify some of the strategies
employed to lower costs or improve
service
 Define the term competitive advantage
and discuss how organizations are using
information systems to gain such an
advantage
 Discuss how organizations justify the
need for information systems
 Why Learn About Information
Systems
in Organizations?
 Information systems (ISs) can
cut costs and increase profits
 Students in most fields need to
know ISs
 Management major might be hired
to design a system to improve
productivity
 Biochemistry major might be hired
to conduct drug research using
computer techniques
Organizations and Information
Systems
 Organization: a formal collection of people
and other resources established to
accomplish a set of goals
 An organization is a system - has inputs,
processing mechanisms, outputs, and
feedback
 Inputs to the system: resources such as
materials, people, and money
 Outputs to the environment: goods or services
Organizations and Information
Systems (continued)

Figure 2.1: A General Model of an Organization

 Organizations and Information
Systems (continued)
 Value chain: series (chain) of activities that
includes inbound logistics, warehouse and
storage, production, finished product storage,
outbound logistics, marketing and sales, and
customer service
 Upstream management: management of raw
materials, inbound logistics, and warehouse
and storage facilities
 Downstream management: management of
finished product storage, outbound logistics,
marketing and sales, and customer service
 Organizations and
Information Systems
(continued)

Figure 2.2: The Value Chain of a Manufacturing

Company
 Organizational
Structures
 Organizational structure:
organizational subunits and the way
they relate to the overall organization
 Categories of organizational structure
 Traditional
 Project

 Team

 Virtual
 Traditional Organizational
Structure
 A hierarchical structure
 Major department heads report to a
president or top-level manager
 Managerial pyramid shows the hierarchy of
decision making and authority
 Traditional Organizational
Structure (continued)

Figure 2.4: A simplified model of the organization,

showing the managerial pyramid from top-level
managers to non management employees
 Traditional
Organizational Structure
(continued)

Figure 2.5: A Traditional Organizational Structure

 Project and Team
Organizational
Structures
 Project organizational
structure: centered on major
products or services
 Many project teams are temporary
 Team organizational structure:
centered on work teams or groups
 Team can be temporary or
permanent, depending on tasks
Project and Team Organizational
Structures (continued)

Figure 2.6: A Project Organizational Structure

 Virtual Organizational Structure and
Collaborative Work
 Virtual organizational structure
 Employs business units in geographically
dispersed areas
 People may never meet face to face

 Allows collaborative work

 Managers and employees can effectively work in
groups, even those composed of members from
around the world
 Organizational Culture
and Change
 Organizational culture
 Major understandings and
assumptions
 Influences information systems

 Organizational change
 How organizations plan for,
implement, and handle change
 Reengineering and
Continuous Improvement
 Reengineering
 Process redesign
 Radical redesign of business processes,
organizational structures, information
systems, and values of the organization
to achieve a breakthrough in business
results
 Reengineering and
Continuous Improvement
(continued)

Figure 2.8: Reengineering

 Reengineering and Continuous
Improvement (continued)
 Continuous improvement
 Constantly seeking ways to improve business
processes
 Benefits
 Increased customer loyalty
 Reduction in customer dissatisfaction

 Reduced opportunity for competitive inroads

Reengineering and Continuous Improvement
(continued)

Table 2.2: Comparing Business Process Reengineering and Continuous

Improvement
 Quality
 Quality: ability of a product or service to meet or exceed
customer expectations
 Techniques used to ensure quality
 Total quality management

 Involving the entire organization, supply chain,

and/or product life cycle
 management approach for an organization,
centered on quality, based on the participation of
all its members and aiming at long-term success
through customer satisfaction, and benefits to all
members of the organization and to society
 widely used in manufacturing, education, call
centers, government, and service industries
 Six sigma
 Quality
 Six sigma
 stands for Six Standard Deviations (Sigma is the
Greek letter used to represent standard deviation in
statistics) from mean.
 Six Sigma methodology provides the techniques and
tools to improve the capability and reduce the defects
in any process.
 It was started in Motorola, where millions of parts are
made using the same process repeatedly.
 Six Sigma methodology improves any existing
business process by constantly reviewing and re-
tuning the process. 
 Uses a methodology known as DMAIC (Define
opportunities, Measure performance, Analyze
opportunity, Improve performance, Control
performance)
 Outsourcing, On-Demand
Computing, and Downsizing
 Outsourcing: contracting with outside
professional services
 On-demand computing: contracting for
computer resources to rapidly respond to an
organization’s varying workflow
 Downsizing: reducing number of employees
 Competitive Advantage
 Significant and (ideally) long-term benefit
to a company over its competition

 Ability to establish and maintain

competitive advantage is vital to the
company’s success
 Factors That Lead Firms
to Seek Competitive
Advantage
 Rivalry among existing competitors
 Threat of new entrants
 Threat of substitute products and
services
 Bargaining power of customers and
suppliers
 Strategic Planning for
Competitive Advantage
 Cost leadership
 Differentiation
 Niche strategy
 Altering the industry structure
 Strategic Planning for Competitive
Advantage (continued)

 Creating new products and services

 Improving existing product lines and
service
 Other strategies
 Growth in sales
 First to market

 Customizing products and services

 Hiring the best people

Performance-Based Information Systems
(continued)

Figure 2.9: Three Stages in the Business Use of

 Productivity

 A measure of output achieved divided by

input required

 Higher level of output for a given level of

input means greater productivity
 Return on Investment
and the Value of
Information Systems
 Earnings growth
 Market share
 Customer awareness and satisfaction
 Total cost of ownership
 Risk
 Managers must consider risks of
designing, developing, and implementing
information systems
 Information system may be a failure
 Costs of development and implementation
of a system can be greater than the
returns from it
 Summary
 An organization is a system - has inputs,
processing mechanisms, outputs, and feedback
 Categories of organizational structure:
traditional, project, team, and virtual
 Organizational culture: major understandings
and assumptions
 Reengineering: radical redesign of business
processes, organizational structures, information
systems, and values of the organization to
achieve a breakthrough in business results
 Summary (continued)
 Continuous improvement: constantly
seeking ways to improve business
processes
 Outsourcing: contracting with outside
professional services
 Downsizing: reducing number of employees
 Competitive advantage: significant, and
(ideally) long-term benefit to a company
over its competition
 Performance-based information systems:
consider both strategic advantage and costs
 Summary (continued)

 Productivity: a measure of output

achieved divided by input required