Samenvatting Business Modeling Essentials of Management Information Systems Chapter 1

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1 Samenvatting Business Modeling Essentials of Management Information Systems Chapter The role of Information Systems in Business Today What s new in management information systems? In the technology area are three interrelated changes: 1. The mobile digital platform composed of smartphones and tablet devices 2. The growth of online software as a service 3. The growth in cloud computing, where more and more business software runs over the Internet As management behavior changes, how work gets organized, coordinated, and measured also changes Due to social networking, collaboration tools, and wiki s (decisions are made faster) o Even when separated by continents and time zones. What does globalization have to do with management information systems? EVERYTHING Six important business objectives: 1. Operational excellence o Improve efficiency of operations achieve higher profitability 2. New Products, Services, and Business models o Business model: describes how a company produces, delivers, and sells a product or service to create wealth. 3. Customer en supplier intimacy o Getting to know its customers and serves them well customers respond by returning and purchasing more raises revenues and profits. o Suppliers: the more a business engages its suppliers, the better the suppliers can provide vital inputs lowers costs. 4. Improved decision making o Operating in fog bank: never having the right information at the right time to make an informed decision. Rely on forecasts, best guesses, luck 5. Competitive advantage o Doing things better than your competitors, helped with the information gathered by: operational excellence; new products, services and business models; customer intimacy; and improved decision making. 6. Survival o Necessities driven by industry-level changes 1.2 Perspectives on Information Systems and Information Technology Information technology (IT): consists of all the hardware and software that a firm needs to use in order to achieve its business objectives. Includes: computer machines, disk drives, mobile handheld devices, software (Windows/Linux operating systems), desktop productivity suite, and computer programs. Information system (IS): can be defined technically as a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making, coordinating, and control in an organization. May help managers and workers analyze problems, visualize complex subjects, and create new products. Contain information about: people, places en things within the organization or environment o o Information: data that have been shaped into a form that is meaningful and useful to human beings. Data: streams of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use. Input: captures or collects raw data from within the organization or from its external environment. Processing: converts this raw input into a meaningful form

2 Output: transfers the processed information to the people who will use it or to the activities for which it will be used. Feedback: output that is returned to appropriate members of the organization to help them evaluate or correct the input stage. Information systems literacy: behavioral as well as a technical approach to studying information systems. Computer literacy: focuses primarily on knowledge of information technology Management information systems (MIS): tries to achieve this broader information systems literacy, deals with behavioral issues as well as technical issues surrounding the development, use and impact of information systems used by managers and employees in the firm. Dimensions of information systems Organizations, people, and information technology Organizations Accomplishes and coordinates work through a structured hierarchy and through its business processes and has its own culture. Business processes: logically related tasks and behaviors for accomplishing work. o Developing a new product, fulfilling an order, hiring a new employee o Include formal rules that have been developed over a long time for accomplishing tasks. Culture: fundamental set of assumptions, values, and ways of doing things, that has been accepted by most of its members. o Parts of an organizations culture can always be found embedded in its information systems. Different levels and specialties in an organization create different interests and points of view often conflict basis for organizational politics. People: A business is only as good as the people who work there and run it. Technology is relatively inexpensive today, but people are very expensive, because people are the only ones capable of business problem solving and converting information technology into useful business solutions. Technology Information technology is one of many tools managers use to cope with change and complexity Computer hardware: physical equipment used for input, processing, and output activities in an information system. Computers of various sizes and shapes; various input, output, and storage devices; and telecommunications devices that link computers together Computer software: consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system. Data management technology: consists of the software governing the organization of data on physical storage media. Networking and telecommunications technology: consisting of both physical devices and software, links the various pieces of hardware and transfers data from one physical location to another. Network: links two or more computers to share data or resources (e.g. printer) Internet is the world s largest and most widely used network Intranets: internal corporate networks bases on Internet technology Extranets: private intranets extended to authorized users outside the organization World Wide Web: service provided by the Internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a page format on the Internet. Information technology (IT) infrastructure: provides the foundation, or platform, on which the firm can build its specific information systems UPS invest heavily in information systems technology to make its business more efficient and customer oriented. 1.3 Understanding Information Systems: A Business Problem-Solving Approach Consider information systems and technologies as solutions to a variety of business challenges and problems.

3 A model of the problem-solving process Problem Identification: Understand what kind of problem exists Problems have to be properly defined by people in an organization before they can be solved o Typical organizational problems: poor business processes, unsupportive culture, political in-fighting, changes in the organizations surrounding environment o Typical technology problems: insufficient or aging hardware, outdated software, inadequate database capacity, insufficient telecommunications capacity, incompatibility of old systems with new technology. o Typical people problems: employee training, difficulties of evaluating performance, legal and regulatory compliance, ergonomics, poor or indecisive management, employee support and participation. Solution Design Design solutions to the problem you have identified o There are usually a great many solutions to any given problem Most successful solutions result from an integrated approach in which new technologies are accompanied by changes in organization and people. Solution, Evaluation and Choice Choose the best solution o A solution that does not have the support of all the major interests in the business can quickly turn into a disaster. Implementation Best solution is one that can be implemented. Involves building the solution and introducing it into the organization o Purchasing or building the software and hardware Change management: refers to the many techniques used to bring about successful change in a business Measurement of outcomes o After a solution has been implemented, it must be evaluated to determine how well it is working and whether any additional changes are required to meet the original objectives. Problem solving: A process, Not an Event Sometimes the chosen solution does not work, and new solutions are required Critical thinking: sustained suspension of judgment with an awareness of multiple perspectives and alternatives. It involves at least four elements: 1. Maintaining doubt and suspending judgment o Create the necessary mental conditions to take a fresh, creative look at problems, and you keep open the chance to make a creative contribution. 2. Being aware of different perspectives o Technology, organization, people 3. Testing alternatives and letting experience guide o Letting experiences be the guide 4. Being aware of organizational and personal limitations 1.4 Information Systems and Your Career Outsourcing and Offshoring Outsourcing: domestic US Offshore outsourcing: low-wage countries

4 Samenvatting Business Modeling Essentials of Management Information Systems Chapter Components of a Business Business: formal organization whose aim is to produce products or provide services for a profit. Strategic choice: decision of what to produce Determines your likely customers, the kinds of employees you will need, the production methods and facilities needed, the marketing themes, and many other choices. Senior management: makes long-range strategic decisions about products and services as well as ensures financial performance of the firm Needs summarized information Middle management: carries out the programs and plans of senior management Need more specific information Operational management: responsible for monitoring the daily activities of the business Need transaction-level information o Number of parts in inventory each day, or hours logged on by each employee Knowledge workers: engineers, scientists, architects design products or services and create new knowledge for the firm. Data workers: secretaries, clerks assist with administrative work at all levels of the firm Production or service workers: produce the product and deliver the service. 2.2 Types of Business Information Systems Transaction processing systems (TPS): system that keeps track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions and the flow of materials in a factory. A computerized system that performs and records the daily routine transactions necessary to conduct business. Business intelligence: data and software tools for organizing, analyzing and providing acces to data to help managers and other enterprise users make more informed decisions. Addresses the decision-making needs of all levels of management Management information systems (MIS): designates a specific category of information systems serving middle management. Provide middle managers with reports on the organization s current performance, used to monitor and control the business and predict future performance Decision/support systems (DSS): focus on problems that are unique and rapidly changing, for which the procedure for arriving at a solution may not be fully predefined in advance. Executive support systems (ESS): help senior management make these decisions. Present graphs and data from many sources through an interface that is easy for senior managers to use. Enterprise applications: systems that span functional areas, focus on executing business processes across the firm and include all levels of management. Enterprise systems / enterprise resource planning (ERP): integrate business processes in manufacturing and production, finance and accounting, sales and marketing, and human resources into a single software system. Supply chain management systems (SCM): to help manage relationships with their suppliers Customer relationship management systems (CRM): to help manage their relationships with their customers Knowledge management systems (KMS): enable organizations to better manage processes for capturing and applying knowledge and expertise. E-business Electronic business: refers to the use of digital technology and the Internet to execute the major business processes in the enterprise. Electronic commerce: deals with the buying and selling of goods and services over the Internet.

5 Electronic government: digitally enable government and public sector agencies relationships with citizens, businesses, and other arms of government. 2.3 Systems for Collaboration and Teamwork Collaboration: working with other to achieve shared and explicit goals.

6 Samenvatting Business Modeling Essentials of Management Information Systems Chapter Using Information Systems to Achieve Competitive Advantage Competitive forces model: provides a general view of the firm, its competitors, and the firm s environment. 5 competitive forces shape fate of firm: 1. Traditional competitors: competitors in market space continuously devise new products, new efficiencies, switching costs. 2. New market entrants: some industries have low barriers to entry (food industry vs. microchip industry) newer companies may have advantages (newer equipment, younger workforce) 3. Substitute products and services: substitutes customers can purchase if your price is too high (Internet music service vs. CDs) 4. Customers: can customers easily switch to competitors products? Can customers force firm and competitors to compete on price alone (transparent marketplace) 5. Suppliers: the more suppliers a firm has, the greater control it can exercise over suppliers. Efficient customer response system: directly links consumer behavior to distribution and production and supply chains. Mass customization: offer individually tailored products or services using the same production resources as mass production. Switching costs: cost of switching from one product or service to competitor 4 Basic Competitive Strategies Low-cost leadership: use information systems to produce products and services at a lower price than competitors while enhancing quality and level of service Product differentiation: use information systems to differentiate products, and enable new services and products Focus on market niche: use information systems to enable a focused strategy on a single market niche; specialize Customer and supplier intimacy: use information systems to develop strong ties and loyalty with customers and suppliers. Some companies pursue several strategies at same time Successfully using IS to achieve competitive advantage requires precise coordination of technology, organizations, and people. The Business Value Chain Model Value chain model: highlights specific activities in the business where competitive strategies can best be applied, and were IS are most likely to have a strategic impact. Primary activities: most directly related to the production and distribution of the firms products and services, which create value for the customer. Support activities: make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input) Benchmarking: involves comparing the efficiency and effectiveness of business processes s strict standards and then measuring performance against those standards. Synergies: When output of some units can be used as inputs to other units

7 When two firms can pool markets and expertise o Recent bank mergers Lower costs and generate profits Enabled by IS that ties together disparate units so they act as whole Core competency: Activities for which firm is world-class leader o World s best miniature parts designer, best package delivery service. Relies on knowledge that is gained over many years of experience as well as knowledge research Any information system that encourages the sharing of knowledge across business units enhances competency o Procter & Gamble uses intranet to help people working on similar problems share ideas and expertise. Network-based strategies: Network economics: o Marginal costs of adding another participant are near zero, whereas marginal gain is much larger Larger number of participants in Internet, greater value to all participants Virtual company: o Uses networks to link people, resources, and ally with other companies to create and distribute products without traditional organizational boundaries or physical locations. Disruptive technologies: substitute products that perform as well or better than anything currently produced. 3.2 Competing on a Global Scale The internet and Globalization: Prior to the Internet, competing globally was only an option for huge firms able to afford factories, warehouses, and distribution centers abroad. The Internet drastically reduces costs of operating globally Globalization benefits: o Scale economies and resource cost reduction o Higher utilization rates, fixed capital costs, and lower cost per unit of production o Speeding time to market 3.4 Competing on Business Processes BPM: Business Process Management Aims to continuously improve processes Uses variety of tools and methodologies to: o Understand existing processes o Design and optimize new processes Steps in BPM 1. Identify processes for change 2. Analyze existing processes 3. Design new process 4. Implement new process 5. Continuous measurement

8 Samenvatting Business Modeling Essentials of Management Information Systems Chapter The Database Approach to Data Management Database: Collection of related files containing records on people, places, or things Prior to digital databases, business used file cabinets with paper files Entity: Generalized category representing person, place, thing on which we store and maintain information o SUPPLIER, PART Attributes: Specific characteristics of each entity o SUPPLIER name, address o PART description, unit price, supplier Relational database: organize data into two-dimensional tables (relations) with columns and rows Field: store data representing an attribute Rows: store data for separate records, or tuples Key field: uniquely identifies each record Primary key: the unique identifier for all the information in any row of the table, and this primary key cannot be duplicated. Establishing relationships Entity-relationship diagram: used to clarify table relationships in a relational database. Relational database tables may have: One-to-one relationship One-to-many relationship Many-to-many relationship Normalization: process of streamlining complex groups of data to minimize redundant data elements and awkward many-to-many relationships, and increase stability and flexibility Referential integrity: to ensure that relationships between coupled tables remain consistent. 5.2 Database Management Systems Database management system (DBMS): specific type of software for creating, storing, organizing, and accessing data from a database. Data definition: to specify the structure of the content of the database Data dictionary: an automated or manual file that stores definitions of data elements and their characteristics. Data manipulation language: to add, change, delete, and retrieve the data in the database.

9 Samenvatting Business Modeling Essentials of Management Information Systems Chapter 8 Kinaxis on-demand Rapid Response software Allows both Cannondale and suppliers to see up-to-date information; faster customer response; reduced inventory; reduced cycle lead times Illustrates: need for enterprise-wide systems for coordinating supply chain Demonstrates: use of cloud services as solution for implementing enterprise applications 8.1 Enterprise Systems Enterprise systems Also called enterprise resource planning (ERP) systems Suite of integrated software modules and a common central database Collects data from many divisions of firm for use in nearly all of firm s internal business activities Information entered in one process is immediately available for other processes Enterprise Software Built around thousands of predefined business processes that reflect best practices o Finance/accounting: general ledger, accounts payable, etc. o Human resources: personnel administration, payroll o Manufacturing/production: purchasing, shipping o Sales/marketing: order processing, billing, sales planning To implement, firms: o Select functions of system they wish to use o Map business processes to software processes Use software s configuration tables for customizing Business value of enterprise systems Increase operational efficiency Provide firm-wide information to support decision making Enable rapid responses to customer requests for information or products Include analytical tools to evaluate overall organizational performance. 8.2 Supply Chain Management Systems Network of organizations and processes for: Procuring raw materials Transforming them into products Distributing the products Upstream supply chain: Firm s suppliers, supplier s suppliers, processes for managing relationships with them Downstream supply chain: Organizations and processes responsible for delivering products to customers Information and Supply Chain Management Inefficiencies cut into a company s operating costs Can waste up to 25 percent of operating expenses

10 Just-in-time strategy Components arrive as they are needed Finished goods shipped after leaving assembly line Safety stock Buffer for lack of flexibility in supply chain Bullwhip effect Information about product demand gets distorted as it passes from one entity to net across supply chain Supply Chain Management Software Supply chain planning systems Model existing supply chain Demand planning Optimize sourcing, manufacturing plans Establish inventory levels Identify transportation modes Supply chain execution systems Manage flow of products through distribution centers and warehouses. Global Supply Chains and the Internet Global supply chain issues Greater geographical distances Greater time differences Participants from different countries o Different performance standards o Different legal requirements Internet helps companies manage global complexities Warehouse management Transportation management Logistics Outsourcing Demand-Driven Supply Chains Push-based model (build-to-stock) o Schedules based on best guesses of demand Pull-based model (demand-driven) o Customer orders trigger events in supply chain Sequential supply chains Concurrent supply chains 8.3 Customer Relationship Management Systems Touch point: (contact point) method of interaction with the customer, such as telepfone, , customer service desk, conventional mail, etc. Partner Relationship Management (PRM): uses many of the same data, tools, and systems as customer relationship management to enhance collaboration between a company and its selling partners. Employee Relationship Management (ERM): deals with employee issues that are closely related to CRM, such as setting objectives, employee performance management, performance-based compensation, and employee training. Churn rate: measures the number of customers who stop using or purchasing products or services from a company

11 Business Value of Supply Chain Management Systems Match supply to demand. Reduce inventory levels. Improve delivery service. Speed product time to market. Use assets more effectively. Reduced supply chain costs lead to increased profitability. Increase sales. 8.4 Enterprise Applications: New Opportunities and Challenges. Social CRM: enable a business to connect customer conversations and relationships form social networking sites to CRM processes.

12 Samenvatting Business Modeling Essentials of Management Information Systems Chapter E-commerce and the Internet Unique Features of E-commerce technology Ubiquity: internet/web technology is available everywhere: at work, at home, and elsewhere via mobile devices. Mobile devices extend service to local areas and merchants. Global reach: the technology reaches acroos national boundaries, around the Earth Universal Standards: there is one set of technology standards, namely Internet standards Richness: Video, audio, and text messages are possible Interactivity: the technology works through interaction with the user. Information Density: the technology reduces information costs and raises quality Price transparency Discrimination Personalization/Customization: the technology allows personalized messages to be delivered to individuals as well as groups. Social technology: user content generation and social networking 9.2 E-commerce Business Models E-tailer: sells physical products directly to consumers or to individual businesses Amazon, RedEnvelope.com Transaction broker: saves users money and time by processing online sales transactions and generating a fee each time a transaction occurs ETrade.com, Expedia Market creator: Provides a digital environment wher buyers and sellers can meet, search for products, display products, and establish prices for those products. Can serve consumer or B2B e-commerce, generating revenue from transaction fees. ebay, Priceline.com Content provider: creates revenue by providing digital content, such as new, music, photos, or video, over the Web. The customer may pay to access the content, or revenue may be generated by selling advertising space. WSJ.com, Gettylmages.com, itunes.com, Games.com o Podcasting o Streaming Community provider: provides an online meeting place where people with similar interests can communicate and find useful information. Portal: provide initial point of entry to the Web along with specialized content and other services. Yahoo, Bing, Google Service Provider: Provides Web 2.0 applications such as photo sharing, video sharing, and user-generated content as services. Provides other services such as online data storage and backup. Google Apps, Photobucket.com, Box.net Revenue Models Advertising Sales Subscription Free/Fremium Transaction fee Affliliate

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14 Samenvatting Business Modeling Essentials of Management Information Systems Chapter Decision Making and Information Systems Types of decisions: Unstructured decisions: the decision maker must provide judgment, evaluation, and insight to solve the problem. typically by higher management / senior management o Each of these decisions is novel, important, and nonroutine, no well-understood/agreed-on procedure Semi structured: elements of both types (unstructured and structured) middle management Structured: repetitive and routine, involve a definite procedure for handling them so that they do not have to be treated each time as if they were new. The Decision-Making Process Intelligence: consists of discovering, identifying and understanding the problems occurring in the organization why the problems exists, where, and what effects it is having on the firm. Design: involves identifying and exploring various solutions to the problem. Choice: consists of choosing among solution alternatives Implementation: involves making the chosen alternative work and continuing to monitor how well the solution is working Business Intelligence in the Enterprise The Business Intelligence Environment Data from business environment: businesses must deal with both structured and unstructured data from many different sources, including mobile devices and the Internet. The data need to be integrated and organized so that they can be analyzed and used by human decision making. Call centers, website, Mobile devices, blogs, stores, suppliers, government employees Business intelligence infrastructure: the underlying foundation of business intelligence is a powerful database system that captures all the relevant data to operate the business Databases, Data Warehouses, Data Marts.

15 Business analytics toolset: a set of software tools are used to analyze data and produce reports, respond to questions posed by managers, and track the progress of the business using key indicators of performance. Statistical models, Data mining, OLAP, Production Reports. Managerial Users and Methods: business intelligence hardware and software are only as intelligent as the human beings who use them. Managers impose order on the analysis of data using a variety of managerial ethods that define strategic business goals and specify how progress will be measured. Business strategy, Performance Management, Balanced score card, Forecasts. Platform: the results form business intelligence and analytics are delivered to managers and employees in a variety of ways, depending on what they need to know to perform their job. Parameterized reports: users enter several parameters as in a pivot table to filter data and isolate impacts of parameters. Dashboards/scorecards: these are visual tools for presenting performance data defined by users. Ad hoc query/search/report creation: these allow users to create their own reports based on queries and searches. Drill down: this is the ability to move from a high level summary to a more detailed view Forecasts, scenarios, models: these include capabilities for linear forecasting, what if scenario analysis, and analyzing data using standard statistical tools. Geographic information systems (GIS): special category of tools for helping decision makers visualize problems requiring knowledge about the geographic distribution of people or other resources. Pivot table: multidimensional analysis Intelligent Systems for Decision Support Expert systems An expert system contains a set of rules to be followed when used. The rules are interconnected, the number of outcomes is known in advance and is limited, there are multiple paths to the same outcome, and the system can consider multiple rules at a single time. The rules illustrated are for a simple credit-granting expert system. Case-based reasoning (CBR) Knowledge and past experiences of human specialists are represented as cases and stored in a database for later retrieval when the user encounters a new case with similar parameters. Fuzzy logic systems A rule-based technology that represents such imprecision by creating rules that use approximate or subjective values. It describes a particular phenomenon or process linguistically and then represents that description in a small number of flexible rules. Neural networks Used for solving complex, poorly understood problems for which large amounts of data have been collected. The find patterns and relationships in massive amounts of data that would be too complicated and difficult for a human being to analyze.

16 Discover this knowledge by using hardware and software that parallel the processing patterns of the biological or human brain. learn patterns from large quantities of data by sifting through data, searching for relationships, building models, and correcting over and over again the model s own mistakes. Genetic algorithms Are useful for finding the optimal solution for a specific problem by examining a very large number of alternative solutions for that problem. Based on techniques inspired by evolutionary biology, such as inheritance, mutation, selection, and crossover (recombination) Works by representing a solution as a string of 0s and 1s Searches a population of randomly generated strings of binary digts to identify the right string representing the best possible solution for the problem. Intelligent agents Helps businesses and decions makers navigate through large amounts of data to locate and act on information that is considered important. Software programs that work in the background without direct human intervention to carry out specific, repetitive, and predictable tasks for an individual user, business process, o software application. Uses a limited built/in or learned knowledge base to accomplish tasks or make decisions on the user s behalf, such as deleting junk , scheduling appointments, or finding the cheapest airfare to California.

17 Samenvatting Business Modeling Essentials of Management Information Systems Chapter Problem Solving and System Development Developing an information system solution is based on the problem-solving process. Information requirements: identify who needs what information, where, when and how Carefully defines the objectives of the new or modified system and develops a detailed description of the functions that the new system must perform. Feasibility study: establishes whether each alternative solution is a good investment, whether the technology needed for the system is available and can be handled by the firm s information systems staff, and whether the organization is capable of accommodating the changes introduced by the system System design: shows how the chosen solution should be realized 11.2 Alternative Systems-Building Approaches Waterfall Rapid prototyping End-user development Purchasing application software systems (Offshore) outcoursing Systems development lifecycle (SDLC): a phased approach to building a system, dividing systems development into a series of formal stages, as illustrated in the following Figure. The systems development lifecycle partitions systems development into formal stages, with each stage requiring completion before the next stage can begin. (The Waterfall Approach) Prototyping: consists of building an experimental system rapidly and inexpensively for end users to evaluate. 1. Identify the user s basic requirements 2. Develop an initial prototype 3. Use the prototype 4. Revise and enhance the prototype End-user development: Create simple information systems Use fourth-generation languages Application Software Systems:

18 General systems Customized for your company o Software package to be modified to meet an organizations unique requirements without destroying the integrity of the packaged software. Outsourcing: have software designed and built elsewhere 11.3 Modeling and Designing Systems Structured Methodologies Data flow diagram Process specifications Structure chart Object-oriented development Based on concepts of class and inheritance Component-based development and Web services Can reduce the time and cost of development through reusing objects and classes for one application for other applications. Computer-aided software engineering (CASE) 11.4 Project Management Application of knowledge, skills, tools, and techniques to achieve targets within specified budget and time constraints 5 major variables; 1. Scope 2. Time 3. Cost 4. Quality 5. Risk Selecting Projects o Developing an information systems plan o Portfolio analysis and scoring Match risk with benefit assign priority to projects o Making the business case Controlling Risk Factors o Implementation and Change Management Particularly stubborn risks 1. Management commitment 2. End-user participation 3. Communication o Overcoming User Resistance Tools: Gantt Chart, PERT chart, MS project