Chapter 1
MANAGING THE
DIGITAL FIRM
1.1 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
OBJECTIVES
• What is the role of information systems in
today’s competitive business environment?
• What exactly is an information system?
What do managers need to know about
information systems?
• How are information systems transforming
organizations and management?
1.2 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
OBJECTIVES
• How has the Internet and Internet technology
transformed business?
• What are the major management challenges
to building and using information systems?
1.3 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
MANAGEMENT CHALLENGES
1. Design competitive and effective systems
2. Understand system requirements of
global business environment
3. Create information architecture that
supports organization’s goal
1.4 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
MANAGEMENT CHALLENGES
4. Determine business value of information
systems
5. Design systems people can control,
understand and use in a socially, ethically
responsible manner
1.5 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Four powerful worldwide changes that
have altered the business environment:
1. Emergence of the Global Economy
2. Transformation of Industrial Economies
3. Transformation of the Business Enterprise
4. The Emerging Digital Firm
1.6 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Emergence of the Global Economy
• Management and control in a global
marketplace
• Competition in world markets
• Global work groups
• Global delivery systems
1.7 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Transformation of Industrial Economies
• Knowledge- and information-based
economies
• Productivity
• New products and services
• Knowledge: a central productive and
strategic asset
1.8 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Transformation of Industrial Economies
• Time-based competition
• Shorter product life
• Turbulent environment
• Limited employee knowledge base
1.9 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Labor Force Composition 1900-1997
Figure 1-1
1.10 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Transformation of the Business Enterprise
• Flattening
• Decentralization
• Flexibility
• Location independence
• Low transaction and coordination costs
• Empowerment
• Collaborative work and teamwork
1.11 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
The Competitive Business Environment and the Emerging Digital Firm
Emergence of the Digital Firm
• Digitally-enabled relationships with
customers, suppliers, and employees
• Core business processes accomplished
via digital networks
• Digital management of key corporate
assets
• Rapid sensing and responding to
environmental changes
1.12 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
What Is an Information System?
A set of interrelated components that collect
(or retrieve), process, store, and distribute
information to support decision making and
control in an organization
1.13 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
What Is an Information System?
• Data: Streams of raw facts representing
events such as business transactions
• Information: Clusters of facts that are
meaningful and useful to human beings in
the processes such as making decisions
1.14 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
What Is an Information System?
Data and Information
Figure 1-2
1.15 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Activities in an Information System
INPUT PROCESS OUTPUT
FEEDBACK
1.16 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Functions of an Information System
1.17 Figure 1-3 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Computer-Based Information System (CBIS)
• Rely on computer hardware and
software
• Processing and disseminating
information
1.18 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Formal Systems
• Fixed definitions of data, procedures
• Collecting, storing, processing,
disseminating, using data
1.19 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
A Business Perspective on Information Systems
• An organizational and management
solution
• Based on information technology
• To a challenge posed by the
environment
1.20 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Information Systems
ORGANIZATIONS TECHNOLOGY
INFORMATION
SYSTEMS
MANAGEMENT
1.21 Figure 1-4 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
A Business Perspective on Information Systems
• Information systems literacy:
Broad-based understanding of information
systems that includes behavioral knowledge
about organizations and individuals using
information systems as well as technical
knowledge about computers.
• Computer literacy: Knowledge about
information technology, focusing on
under-standing how computer-based
technologies work
1.22 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Major Business Functions
• Sales and marketing
• Manufacturing
• Finance
• Accounting
• Human resources
1.23 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Organizations
Key Elements:
• People: Managers, knowledge workers,
data workers, production or service
workers
• Structure: Organization chart , groups of
specialists, products, geography
1.24 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Organizations
• Operating procedures: Standard operating
procedures (SOP, rules for action)
• Politics: Power to persuade, get things done
• Culture: Customs of behavior
1.25 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Management
Levels:
• Senior managers: make long-range
strategic decisions about products and
services
• Middle managers: Carry out the programs
and plans of senior management
• Operational managers: monitor the firm’s
daily activities
1.26 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Computer Technology
Tools managers use to cope with change
• Hardware: Physical equipment
• Software: Detailed preprogrammed
instructions
• Storage: Physical media for
storing data and the software
1.27 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Computer Technology
• Communications Technology:
transfers data from one physical location
to another
• Networks: link computers to share data
or resources
1.28 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
TECHNICAL APPROACHES
COMPUTER
OPERATIONS
SCIENCE
RESEARCH
MANAGEMENT
SCIENCE
MIS
SOCIOLOGY
PSYCHOLOGY POLITICAL
SCIENCE
BEHAVIORAL APPROACHES
Figure 1-5
1.29 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Socio-Technical Systems
Optimize systems performance:
• Technology and organization
• Organizations mutually adjust to one
another until fit is satisfactory
1.30 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Socio-technical Systems
Figure 1-6 SOURCE: Liker, et al, 1987
1.31 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
The Interdependence Between Organizations and Information Systems
1.32
Figure 1-7
© 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
THE NETWORK REVOLUTION AND THE INTERNET
The Widening Scope of Information Systems
• 1950s: Technical changes
• 60s-70s: Managerial controls
• 80s-90s: Institutional core activities
Growing Importance
1.33 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
THE NETWORK REVOLUTION AND THE INTERNET
The Widening Scope of Information Systems
Figure 1-8
1.34 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
What You Can Do on the Internet
• Communicate and collaborate
• Access information
• Participate in discussions
• Supply information
• Find entertainment
• Exchange business transactions
1.35 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
New Options for Organizational Design
• Flattening organizations
• Separating work from location
• Reorganizing work-flows
• Increasing flexibility
• Redefining organizational boundaries
1.36 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Flattening Organizations Information Systems
Figure 1-9
1.37 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Redesigned Work Flow For Insurance Underwriting
Figure 1-10
1.38 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
The Digital Firm
• Electronic commerce
• Electronic business
• Electronic market: Information systems
links, buyers and sellers to exchange
information, products, services, payments
1.39 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
1.40 Figure 1-11 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Electronic Commerce
• Internet links buyers, sellers
• Lower transaction costs
• Goods and services advertised, bought,
exchanged worldwide
• Business-to-business transactions
increasing
1.41 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Electronic Business
• Internet: Business builds private, secure
network
• E-mail, Web documents, group
software: Extends effective
communication and control
• Extranet: Extension of intranet to
authorized external users
1.42 © 2003 by Prentice Hall
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Information Architecture and Information Technology Infrastructure
1.43 Figure 1-12 © 2003 by Prentice Hall
Chapter 1
MANAGING THE
DIGITAL FIRM
1.44 © 2003 by Prentice Hall