To Information S y Stems

CHAPTER
Introduction
to
Information
Systems
Mass Customization
Revisited
Building Impenetrable Customer

Loyalty
"A company that aspires to give customers exactly
what they want must look at the world through new
lenses. It must use technology to become two
things: a mass customizer that efficiently provides
individually customized goods and services, and a
one-to-one marketer that elicits information from its
customer about his or her specific needs and
preferences."
B. Joseph Pine, II, Strategic Horizons
What is Data?
Raw Material
Numbers and strings of letters with
no precise context or meaning
What is Information?
Data processed with knowledge
Data endowed with relevance and
purpose
Data becomes information when its
creator adds meaning
An organized, meaningful, and
useful interpretation of data
What is Knowledge?
A body of guidelines and rules used to

select, organize, and manipulate data to
make it suitable for a given task
An awareness and understanding of a set
of information and how that information
can be put to its best use
Internalized information + the ability to
utilize this information
Data transformed into

Information
Information
Knowledge
Process
Data
A collection of facts organized

in such a way that they have
additional value beyond the
value of facts themselves.
Guidelines and procedures used to
select, organize, and manipulate data
to make it suitable for a specific task.
Raw facts
Data becomes Information
Establishing
relationships
between data
creates information.
Information = Data + Relationships
Characteristics of Valuable
Information
Relevant
Complete
Accurate
Current/Timely
Economical
Accessible
Does Perfect Information

Lead to Perfect Decisions?
IBM
Among the first to learn that PCs were

revolutionizing the computer industry.
Wal-Mart
We got big by replacing inventory with

information
Wal-Mart CIO
Determining the Value of

Information
Measurements
Time saved, lower costs
More accurate forecasts
Improved service
Often difficult to quantify

Payback period?
What is a System?
Components that work together to

achieve a goal by accepting input,
processing it, and producing output
in an organized manner.
e.g. a sound system
Components of a System
INPUTS
INPUTS
Gathering
Gathering and
and
capturing
capturing raw
raw data
data
PROCESSING
PROCESSING
Converting
Converting or
or
transforming
transforming data
data
into
into useful
useful outputs
outputs
Output that is used to
make changes to input
or processing activities
Feedback
OUTPUTS
OUTPUTS
Producing
Producing useful
useful
information,
information, usually
usually in
in
the
the form
form of
of documents.
documents.
Components of a System
Open vs. Closed Systems
Closed System
Stands alone
No connection to other systems
Open System
Interfaces and interacts with other
systems
Gets information from and provides
information to other systems
System Performance
Efficiency
A measure of what is produced divided

by what is consumed.
Effectiveness
A measure of what is achieved divided

by the stated goal.
System Performance
Standards
Sales
Defects
System Variables and

Parameters
System Variable
A quantity or item that can be controlled by

the decision maker (controllable).
e.g. selling price
System Parameter
A value or quantity that cannot be controlled

by the decision maker.
e.g. raw material costs
So, What is an Information

System?
Information: An
organized, meaningful,
and useful interpretation
of data
System: Components that work

together to achieve a goal by
accepting input, processing it,
and producing output in an
organized manner
Information System: Components that

work together to process data and
produce information (to help
companies solve problems and make
decisions).
The Components of a CBIS

1)
2)
Hardware
Software
3)
4)
5)
6)
Operating systems
Applications
Databases
Telecommunications/Networks
People
Procedures
Types of Business
Information Systems
Transaction Processing
E-Commerce
Workflow
Enterprise Resource Planning
Management Information
Decision Support
Artificial Intelligence/Expert
Transaction
Any business related exchange
Tend to be routine, labor-intensive
Interactions
Transaction processing system (TPS)
The application of information

technology to routine, repetitive, and
usually ordinary business transactions
System
E-Commerce
E-Commerce
Any business transaction executed

electronically between parties involving
the exchange of goods and/or services
B2B, B2C
Workflow
Rule-based
E-Commerce
Lowering Barriers to Entry
Traditionally
Sales force
Advertising & promotion
Factories, warehouses, retail stores
Competing electronically
Increases the threat of new companies
Enterprise Resource
Planning (ERP)
Integrated programs that can
manage a companys entire set of
business operations
Often coordinate planning, inventory
control, production and ordering
System (MIS)
Management Information System
Used to provide routine information to

help managers plan, control, and make
decisions
Characteristics
Focus on operational efficiency

Supports functional areas
Common database
Standard reports
System
Types of Reports
Scheduled
Demand
Exception
Decision Support Systems
Decision Support Systems (DSS)
Used to support decision making (e.g.

where to build, how much to order)
Characteristics
Suggests and compares alternatives
Problem is complex
Information is voluminous
Artificial Intelligence
Artificial Intelligence (AI)
A field that involves computer systems taking

on the characteristics of human intelligence
Robotics
Natural language processing
Learning systems
Neural networks (patterns & trends)
Expert Systems
Expert Systems (ES)
Give the computer the ability to

make suggestions and act like an
expert in a particular field
Medical diagnoses
Repair problems
Credit evaluations
Investment strategies
Systems Development
Systems Development
The activity of creating or modifying

existing business systems.
Objectives
Make the process manageable
Achieve predictable costs and timing
Systems Development
Steps
1)
Systems Investigation
2)
Systems Analysis
3)
Gain a clear understanding of the problem

to be solved or opportunity to be
addressed.
Define the problems and opportunities of
the existing system.
Systems Design
Determine how the new system will work

to meet the business needs defined during
systems analysis.
Systems Development
Steps
4)
Systems Implementation
5)
Create or acquire the various system

components defined in the design step,
assemble them, and put the new system into
operation.
System Maintenance and Review
Check and modify the system so that it

continues to meet changing business needs.
CHAPTER
Information
Systems in
Organizations
Strategic Information
Systems
Strategy
A
plan designed to help an

organization gain a competitive
advantage
Strategic
Information Systems
Information
systems that help

accomplish a strategy
Achieving a
Competitive Advantage
The essence of strategy is

innovation, so competitive
advantage often occurs when an
organization tries a strategy
that no one has tried before.
e.g. Dell was the first PC

manufacturer to use the Web to
take customer orders.
The Value Chain

Michael Porter
A series or chain of basic

activities that add value to a
firms products or services
Critical leverage points where
information technology can
enhance a firms competitive
position
The Value-Added Process

Inputs
Money
Materials
People
Machines
Data
Information
Decisions
Value-Added Process
Increases the combined
value of the inputs.
Outputs
Products
Services
Data
Information
The Value Chain

What
value
can IT
add at
each
step in
the
Value
Chain?
Five-Force Model
Competitive forces that
lead firms to seek
competitive advantage
Buyer
Power
Substitute
Products
Rivalry
New
Entrants
Supplier
Power
Ways to Achieve a
Reduce costs
Automation of a business process

Transaction processing
Online customer service
Factory robotics
Raise barriers to entry

Legal protection of intellectual property
High cost of entry
Ways to Achieve a
Establish high switching costs

Penalties for terminating contracts
Software re-training
Create new products and services

Copyright protection
Continuous innovation
Ways to Achieve a
Differentiate products and services

Branding
First to market
Enhance products and services

Longer warranties, more information
Better service
Ways to Achieve a
Establish alliances
Bundling products
Rewards programs
Outsourcing
Lock in suppliers or customers

Purchasing volume
Create a standard
Ways to Achieve a
Potentially winning business

moves
PLUS
Ideas for harnessing

technology to implement
those moves
Organizational Structures
An organizations structure can

have an impact on how
information systems are viewed
and what kind are used:
Hierarchical
Project/Product
Team
Multidimensional
Traditional Organizational
Structure
Project Organizational
Structure
Team Organizational
Structure
Member Member
Member
Member
Member
Team
Leader
Management
Multidimensional (Matrix)
Organizational Structure
Organizational Culture &

Change
Organizational Culture
Set of shared beliefs and assumptions
Organizational Change
A process that alters the way an
organization functions
Often associated with new IS
Organizational Change
Lewin & Schein
Create receptive
climate(there is a
better way to
operate)
Learn new
methods, obtain
commitment
Reinforce,
reward new
behavior
Reengineering
The radical redesign of business

processes to achieve a significant
breakthrough in business results
Delivery time
Product & service quality
Costs, revenue & productivity
Reengineering
Employee resistance
Employees must understand benefits
Old rules must be challenged
Examples
Size of orders
Credit approval
Decision-making level
Reengineering
Examples of reengineering
initiatives
Simplifying work processes
Combining several jobs into one
Outsourcing ancillary processes
Entering new business areas
Establishing new management
structures
Renovating technology systems
Reengineering vs.
Continuous Improvement
Strong action to solve
serious problems
Routine actions to make

minor improvements
Top-down-driven by senior Worker driven

executives
Broad in scope; cuts across Narrow in scope; focus in a
organizations
given area
Goal is to achieve a major
breakthrough
Goal is continuous, gradual

improvement
Total Quality Management
Company-wide effort to add

more value
Keen awareness of customer
Strategic vision for quality
Empowerment of employees
Rewards for high quality
Outsourcing
Contracting with outside professional

services to meet specific business
needs.
Focus on core business
Save money
Downsizing
Reducing the number of employees

to cut costs
Performance-Based
Information Systems
Productivity
Return on Investment
A measure of the output achieved divided by

the input required.
Profit or benefit as a percentage of investment
Earnings Growth
Market Share
Customer Awareness & Satisfaction
Total Cost of Ownership
Identifying Risks
How well are requirements
understood?
Does the project require
pioneering effort?
Is there a risk of severe business
repercussions?
Leading Edge vs.

Bleeding Edge
Bleeding Edge: When failure

occurs because an organization
tries to be too far out on the
technological leading edge
Time-Warners Pathfinder portal
Leading Edge: Let competitors

test the new technology first
Microsoft Word, Excel, Access, IE
Justifying IS
Tangible savings (reduced costs)

Intangible savings (better decisions)
Legal requirements (reports)
Modernization (Y2K, new apps)
Pilot project (laptops)
Roles and Functions

in the IS Department
Homework
Read articles about Buffet & Gates
Subscribe to ListProc this week
Study Guide by Friday
Test on Monday

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CHAPTER

Building Impenetrable Customer

A body of guidelines and rules used to

Data transformed into

A collection of facts organized

Data becomes Information

Information = Data + Relationships

Does Perfect Information

Among the first to learn that PCs were

We got big by replacing inventory with

Determining the Value of

Often difficult to quantify

Components that work together to

e.g. a sound system

Open vs. Closed Systems

A measure of what is produced divided

A measure of what is achieved divided

System Variables and

A quantity or item that can be controlled by

A value or quantity that cannot be controlled

So, What is an Information

System: Components that work

Information System: Components that

The Components of a CBIS

Transaction processing system (TPS)

The application of information

Any business transaction executed

Lowering Barriers to Entry

Management Information System

Used to provide routine information to

Focus on operational efficiency

Decision Support Systems

Decision Support Systems (DSS)

Used to support decision making (e.g.

Artificial Intelligence (AI)

A field that involves computer systems taking

Expert Systems (ES)

Give the computer the ability to

The activity of creating or modifying

Gain a clear understanding of the problem

Determine how the new system will work

Create or acquire the various system

System Maintenance and Review

Check and modify the system so that it

plan designed to help an

systems that help

The essence of strategy is

e.g. Dell was the first PC

The Value Chain

A series or chain of basic

The Value-Added Process

The Value Chain

Automation of a business process

Raise barriers to entry

Establish high switching costs

Create new products and services

Differentiate products and services

Enhance products and services