IS impact in Organization

IS importance to Society
Organizational Strategy
Competitive Advantages and IS
This lecture encourages you to become familiar
with your
• IT impact Organization
• IT impact Society
• Organization’s strategy,
• Mission, goals
• To understand its business problems and how
it makes (or loses) money.
• It will help you understand how information
technology contributes to organizational
strategy.
• Further, you likely will become a member of
business/IT committees that decide (among
many other things)
• how to use existing technologies more
effectively and whether to adopt new ones.
• After studying this chapter, you will be able to
make immediate contributions in these
committees when you join your organizations.
How Does IT Impact
Organizations?
• IT Reduces the Number of Middle
Managers
• IT Changes the Manager’s Job
• Will IT Eliminate Jobs?
• IT Impacts Employees at Work
IT Reduces the Number of
Middle Managers
• IT makes middle managers more
productive
• Consequently, IT reduces the number of
middle managers required
IT Changes the Manager’s Job

• Decision making is the most important

managerial task
• IT changes the way managers make
decisions
– IT provides near-real-time information
– Managers have less time to make decisions
– IT provides tools for analysis to assist in decision
making
Will IT Eliminate Jobs?

• The competitive advantage of replacing

people with IT & machines is increasing
rapidly
• Increasing the use of IT in business also:
– Creates new job categories
– Requires more employees with IT knowledge and
skills
IT Impacts Employees at Work

• IT Impacts Employees’ Health & Safety

– Job Stress
– Long-term use of the keyboard & mouse
• IT Provides Opportunities for People with
Disabilities
– Speech-recognition for employees unable to type due
to physical impairment
– Audible screen tips for employees who are visually
impaired
Potential IT impacts on
managers:
• IT may reduce the number of middle
managers.
• IT will provide managers with real-time or
near-real-time information, meaning that
managers will have less time to make
decisions.
• IT will increase the likelihood that
managers will have to supervise
geographically dispersed employees and
teams.
Potential IT impacts on non-
managerial workers:
• IT may eliminate jobs.
• IT may cause employees to experience
a loss of identity.
• IT can cause job stress and physical
problems, such as repetitive stress
injury.
Importance of Information
Systems to Society
• IT Affects Our Quality of Life
• The Robots Revolution Is Here
Now
• Improvements in Healthcare
IT Affects Our Quality of Life

• IT has changed the way we work

– Smartphones provide constant access to text,
email, and voice communications
– The lines between time at work and leisure time at
home have become blurred
– Surveys indicate employees take laptops and
smartphones on vacation
The Robot Revolution is Here
Now
• Robotics used in Industry:
– Manufacturing
– Hospitals
– Farming operations
The Robot Revolution is Here
Now
• Robotics used in the Home:
– Roomba to vacuum our floors
– Scooba to wash our floors
– Verro to clean our pools
– Looj to clean our gutters
Improvements in Healthcare

• IT used in Healthcare to:

– Make better/faster diagnoses
– Monitor critically ill patients more accurately
– Streamline the process of researching &
developing new drugs
– To enhance the work of radiologists
– Allow surgeons to use virtual reality to plan
complex surgeries & use robots to remotely
perform surgery
IT Negative societal effects:

• IT can cause health problems for

individuals.
• IT can place employees on constant call.
• IT can potentially misinform patients
about their health problems.
IT Positive societal effects:

• IT can provide opportunities for people

with disabilities.
• IT can provide people with flexibility in
their work (e.g., work from anywhere,
anytime).
• Robots will take over mundane chores.
• IT will enable improvements in
healthcare.
• In many cases, organizations achieve
competitive advantage by managing their
business processes more profitably than their
competitors do.

• Therefore, you begin this chapter with an

introduction to business processes and
business process management.
• You will then see how information systems
enable organizations to respond to business
pressures.

• Next, you will learn how information systems

help organizations gain competitive
advantages in the marketplace.
 Business Processes
• A business process is an ongoing collection of
related activities that create
• a product or
• a service of value to the organization,
• its business partners, and/or its customers.
 A process is comprised of three
fundamental elements:

1. • Inputs: Materials, services, and information

that flow through and are transformed as a
result of process activities
2. • Resources: People and equipment that
perform process activities
3. • Outputs: The product or a service created
by the process
• If the process involves a customer, then that
customer can be either internal or external to
the organization.
• A manager who is the recipient of an internal
reporting process is an example of an internal
customer.
• In contrast, an individual or a business that
purchases the organization’s products is the
external customer of the fulfillment process.
• Successful organizations measure their
process activities to evaluate how well they
are executing these processes.
• Two fundamental metrics that organizations
employ in assessing their processes are
• Efficiency
• Effectiveness.
 Efficiency
• Efficiency focuses on doing things well in the
process; for example,
• Progressing from one process activity to
another without delay or without wasting
money or resources.
 Effectiveness
• Effectiveness focuses on doing the things that
matter; that is,
• creating outputs of value to the process
customer—for example,
• high-quality products.
• Many processes cross functional areas in an
organization. For example,
Product development involves
• Research,
• Design,
• Engineering,
• Manufacturing,
• Marketing, and
• Distribution.
 Single functional area
• Other processes involve only a single
functional area.
• Table 2.1 identifies the fundamental business
processes performed in an organization’s
functional areas.
 Cross-Functional Processes
• cross-functional business processes, meaning
that no single functional area is responsible for
their execution. Rather, multiple functional areas
collaborate to perform the process.
• For a cross-functional process to be successfully
completed, each functional area must execute its
specific process steps in a coordinated,
collaborative way. To clarify this point, let’s take a
look at the procurement and fulfillment cross-
functional processes.
 Procurement Process
• The procurement process includes all of the
tasks involved in acquiring needed materials
externally from a vendor.
• Procurement comprises five steps that are
completed in three different functional areas
of the firm:
• warehouse,
• purchasing,
• and accounting.
 Procurement Process
• The process begins when the warehouse
recognizes the need to procure materials,
perhaps due to low inventory levels.
• The warehouse documents this need with a
purchase requisition, which it sends to the
purchasing department (Step 1).
• In turn, the purchasing department identifies
a suitable vendor, creates a purchase order
based on the purchase requisition, and sends
the order to the vendor (Step 2).
• When the vendor receives the purchase order, it
ships the materials, which are received in the
warehouse (Step 3).
• The vendor then sends an invoice, which is
received by the accounting department (Step 4).
• Accounting sends payment to the vendor,
thereby completing the procurement process
(Step 5).
 Fulfilment Process
• The fulfilment process is concerned with
processing customer orders.
• Fulfilment is triggered by a customer purchase
order that is received by the sales
department.
• Sales then validates the purchase order and
creates a sales order.
• The sales order communicates data related to
the order to other functional areas within the
organization, and it tracks the progress of the
order.
• The warehouse prepares and sends the
shipment to the customer.
• Once accounting is notified of the shipment, it
creates an invoice and sends it to the
customer.
• The customer then makes a payment.
• An organization’s business processes can
create a competitive advantage if they enable
the company to innovate or to execute more
effectively and efficiently than its competitors.
• They can also be liabilities, if they make the
company less responsive and productive.
 The airline industry
• Consider the airline industry. It has become a
competitive necessity for all of the airlines to
offer electronic ticket purchases via their Web
sites. To provide competitive advantage,
however, these sites must be highly
responsive and they must provide both
current and accurate information on flights
and prices.
• An up-to-date,
• user-friendly site that provides fast answers
to user queries will attract customers and
increase revenues.
• In contrast, a site that provides outdated or
inaccurate information, or has a slow response
time, will hurt rather than improve business.
 e-ticketing process
• E-ticketing consists of four main process
activities:
• searching for flights,
• reserving a seat,
• processing payment, and
• issuing an e-ticket.
• These activities can be broken down into more
detailed process steps.
 Receive Ticket Order
Traveler Airline Web Site
Seats NO
Notify Traveler
Plan Trip Available
YES
Check Flights Reserve Seats
NO

Use NO Frequent
NO Credit Flyer Mileage
Seats Card? Sufficient?
Available?
YES
YES
YES Charge Credit Card
Subtract Mileage
Submit Ticket Order
Charge NO
Notify Traveler
OK?
Receive e-Ticket YES
Confirm Flight(s)

Issue e-Ticket
• The customers of the process are travellers
planning a trip, and the process output is an e-
ticket.
• Travellers provide inputs to the process:
• the desired travel parameters to begin the
search,
• the frequent flyer miles number, and
• their credit card information.
• In addition, a computerized reservation
system that stores
• information for many airlines also provides
some of the process inputs—such as the
• seat availability and
• prices.
 Resources
• The resources used in the process are
• the airline
• Web site,
• the computerized reservation system, and,
• if the customer calls the airline call center at
any time during the process, the call center
system and
• the human travel agents.
• The process creates customer value by
efficiently generating an output that meets
the customer
• search criteria —
• dates and
• prices.
 Performance of the process
• The performance of the process depends on
efficiency metrics such as
• the time required to purchase an e-ticket,
from the moment the customer initiates the
ticket search until he or she receives the e-
ticket.
• Effectiveness metrics include customer
satisfaction with the airline Web site.
• Finally, the performance of the process may
be affected
• if the quality or the timeliness of the inputs is
low—for example, if the customer enters the
wrong dates—or
• if the process resources are not available—for
example, if the Web site crashes before the
purchase is finalized.
 how can organizations determine if
their business processes are well
designed?
• Clearly, good business processes are vital to
organizational success.
• The first step is to document the process by
describing its steps,
• its inputs and
• outputs, and
• its resources.
• The organization can then analyze the process
and, if necessary, modify it to improve its
performance.
 Information Systems and Business
Processes
• An information system (IS) is a critical enabler
of an organization’s business processes.
• Information systems facilitate
• communication and coordination among
different functional areas, and
• allow easy exchange of, and access to, data
across processes.
Specifically, ISs play a vital role in three
areas

1. • Executing the process

2. • Capturing and storing process data
3. • Monitoring process performance
 Executing the Process
• In some cases the role is
• fully automated—that is, it is performed
entirely by the IS.
• In other cases, the IS must rely on the
manager’s judgment,
• expertise, and
• intuition.
• An IS helps organizations execute processes
efficiently and effectively.
• IS are typically embedded into the processes,
and they play a critical role in executing the
processes.
• In other words, an IS and processes are usually
intertwined.
• If the IS does not work, the process cannot be
executed.
• IS help execute processes
• by informing people when it is time to
complete a task,
• by providing the necessary data to complete
the task, and, in some cases,
• by providing the means to complete the task.
• In the procurement process, for example,
• the IS generates the purchase requisitions and
then informs the purchasing department that
action on these requisitions is needed.
• The accountant will be able to view all
shipments received to match an invoice that
has been received from a supplier and verify
that the invoice is accurate.
• Without the IS, these steps, and therefore the
process, cannot be completed. For example, if
the IS is not available, how will the warehouse
know which orders are ready to pack and
ship?
• In the fulfillment process, the IS will inform
people in the warehouse that orders are ready
for shipment.
• It also provides them with a listing of what
materials must be included in the order and
where to find those materials in the
warehouse.
 Capturing and Storing Process Data
• Processes create data such as
• dates,
• times,
• product numbers,
• quantities,
• prices, and
• addresses, as well as
• who did what, when, and where.
• IS capture and store these data, commonly
referred to as process data or transaction
data.
• Some of these data are generated and
automatically captured by the IS. These are
data related to who completes an activity,
when, and where.
• Other data are generated outside the IS and
must be entered into it.
• This data entry can occur in various ways,
ranging from manual entry to automated
methods involving data in forms such as bar
codes that can be read by machines.
• In the fulfillment process,
• for example, when a customer order is
received by mail or over the phone, the
person taking the order must enter data such
as the customer’s name, what the customer
ordered, and how much he or she ordered.
• Significantly, when a customer order is
received via the firm’s Web site, then all
customer details are captured by the IS.
• Data such as
• the name of the person entering the data
(who),
• at which location the person is completing the
task (where),
• and the date and time (when) are
automatically included by the IS when it
creates the order.
• The data are updated as the process steps are
executed.
• When the order is shipped, the warehouse
will provide data about which products were
shipped and in what quantities, and the IS will
automatically include data related to who,
when, and where.
• Advantage:
• The data need to be entered into the system only
once.
• Further, once they are entered, other people in
the process can easily access them, and there is
no need to re-enter them in subsequent steps.
• The data captured by the IS can provide
immediate feedback. For example, the IS can use
the data to create a receipt or to make
recommendations for additional or alternate
products.
 Monitoring Process Performance
• A third contribution of IS is to help monitor
the state of the various business processes.
That is, the IS indicates how well a process is
executing.
• The IS performs this role by evaluating
information about a process. This information
can be created either at the
• instance level (i.e., a specific task or activity)
or
• the process level (i.e., the process as a whole).
 Example
• A company might be interested in the status
of a particular customer order.
• Where is the order within the fulfilment
process?
• Was the complete order shipped? If so, when?
• If not, then when can we expect it to be
shipped?
 For the procurement process,
• when was the purchase order sent to the
supplier?
• What will be the cost of acquiring the
material?
 At the process level
• At the process level, the IS can evaluate
• how well the procurement process is being
executed by calculating the lead time, or
• the time between sending the purchase order
to a vendor and receiving the goods, for each
order and each vendor over time.
 Detect Problem
• Not only can the IS help monitor a process, it
can also detect problems with the process.
• The IS performs this role by comparing the
information with a standard—that is, what the
company expects or desires—to determine if
the process is performing within expectations.
• Management establishes standards based on
organizational goals.
• If the information provided by the IS indicates
that the process is not meeting the standards,
• then the company assumes that some type of
problem exists.
• Some problems can be routinely and
automatically detected by the IS, whereas
others require a person to review the
information and make judgments.
• For example, if the average time to process a
customer order appears to have increased
over the previous month
Competitive Advantage and
Strategic Information
Systems
• Porter’s Competitive Forces
Model
• Porter’s Value Chain Model
• Strategies for Competitive
Advantage
Competitive Advantage and
Strategic Information
Systems
• Competitive Strategy
– A statement identifying a business’s
approach to compete, it’s goals, and the
plans and policies required to attain those
goals.
Competitive Advantage and
Strategic Information
Systems
• Strategic Information Systems
(SIS)
– An information system that helps an
organization achieve and maintain a
competitive advantages
Porter’s Competitive Forces
Model
Porter’s Competitive Forces
Model
1. Threat of Entry of New Competitors
2. Bargaining Power of Suppliers
3. Bargaining Power of Customers/Buyers
4. Threat of Substitute Products or
Services
5. Rivalry Among Existing Firms within
the Industry
Porter’s Value Chain Model
Porter’s Value Chain Model
• Value Chain
– A sequence of activities through which the
organization’s inputs are transformed into valuable
outputs.
• Primary Activities
– Relate to Production & Distribution of Products &
Services
• Support Activities
– Support Primary Activities Contributing to
Competitive Advantage
Primary Activities

• Five Primary Activities for

Manufacturing
1. Inbound Logistics (inputs)
2. Operations (manufacturing & testing)
3. Outbound Logistics (storage & distribution)
4. Marketing & Sales
5. After Sales Services
Support Activities

• Four Support Activities

1. Firm’s Infrastructure (accounting, finance,
management)
2. Human Resources Management
3. Product & Technology Development (R&D)
4. Procurement
Strategies for Competitive
Advantage
• Cost Leadership
• Differentiation
• Innovation
• Operational Effectiveness
• Customer-Orientation
• [Link] leadership strategy. Produce products and/or services at the lowest cost in the
industry. An example is Walmart’s automatic inventory replenishment system, which enables
Walmart to reduce inventory storage requirements. As a result, Walmart stores use floor
space only to sell products, and not to store them, thereby reducing inventory costs.

• 2. Differentiation strategy. Offer different products, services, or product features than your
• competitors. Southwest Airlines, for example, has differentiated itself as a low-cost,
shorthaul, express airline. This has proved to be a winning strategy for competing in the
highly competitive airline industry.

• 3. Innovation strategy. Introduce new products and services, add new features to existing
products and services, or develop new ways to produce them. A classic example is the
introduction of automated teller machines (ATMs) by Citibank. The convenience and cost-
cutting features of this innovation gave Citibank a huge advantage over its competitors. Like
many innovative products, the ATM changed the nature of competition in the banking
industry. Today, an ATM is a competitive necessity for any bank. Another excellent example is
Apple’s rapid introduction of innovative products.

• 4. Operational effectiveness strategy. Improve the manner in which a fi rm executes its

internal business processes so that it performs these activities more effectively than its
rivals. Such improvements increase quality, productivity, and employee and customer
satisfaction while decreasing time to market.

• 5. Customer orientation strategy. Concentrate on making customers happy. Web-based

systems are particularly effective in this area because they can create a personalized, one-
to-one relationship with each customer. Amazon ([Link]), Apple
([Link]), and Starbucks
 Mumbai University Questions
• Q1> What is information system? Explain the necessary
elements with neat diagram.
• Q2>List types of Information system? Explain in brief
• Q3> Discuss competitive advantage achieved in IS.
Potential Question:
1. Discuss impact of IT in an Organization.
2. Explain in detail competitive advantage and IS
strategies.
3. Explain Rolls, characteristics, benefits of MIS.
4. Explain Porter’s competitive Force model.
5. Explain in detail IS impact on society.