chapter eighteen Using Advanced Information Technology to Increase

chapter eighteen Using Advanced Information Technology to Increase Performance Mc. Graw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The Mc. Graw-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. 3

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 4

Information and the Manager’s Job • Data – Raw, unsummarized, and unanalyzed facts. • Information – Data that are organized in a meaningful fashion 5

Attributes of Useful Information 6

Factors Affecting the Usefulness of Information Figure 18. 1 7

What is Information Technology? • Information Technology – set of methods or techniques for acquiring, organizing, storing, manipulating, and transmitting information 8

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 9

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 10

Information and Decisions • Most of management is about making decisions • To make effective decisions, managers need information, both from inside and outside the organization 11

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 12

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 13

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 14

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 15

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 16

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 17

A Product Life Cycle Figure 18. 2 18

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 19

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 20

A Product Life Cycle • Advances in IT are one of the most important determinants of the length of a product’s life cycle • The shorter the length of a product’s life cycle because of advancing IT the more important it is to innovate products quickly and continuously 21

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. 22

A Typical Four-Tier Information System Figure 18. 3 23

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 24

Six Computer-Based Management Information Systems Figure 18. 4 25

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 26

The Organizational Hierarchy Drawbacks • Can reduce timeliness of information • Reduces quality of information • Tall structure can make for an expensive information system 27

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. 28

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. 29

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 30

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. 31

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 32

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 33

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 34

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 35

Types of Information Systems • E-Commerce Systems – Trade that takes place between companies, and between companies and individual customers, using IT and the Internet 36

Types of E-Commerce Figure 18. 5 37

E-Commerce Systems • Business-to-business (B 2 B) – trade that takes place between companies using IT and the Internet to link and coordinate the value chains of different companies 38

E-Commerce Systems • B 2 B marketplace – Internet-based trading platform set up to connect buyers and sellers in an industry 39

Types of E-Commerce • Business-tocustomer (B 2 C) – trade that takes place between a company and individual customers using IT and the Internet 40

Strategic Alliances, B 2 B 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 41

Strategic Alliances, B 2 B Network Structures, and IT • B 2 B 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 42

How Computer-Based Information Systems Affect the Organizational Hierarchy Figure 18. 6 43

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. 44

Communication Flows at Tel Co. and Soft Co. Figure 18. 7 45

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 46

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 47

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 48

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. 49

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. 50