Chapter 15: Managing Global Systems

Summary:

In the final chapter of our textbook we take a look into how the advent of information systems is a driving force behind international business. In many instances, nationalized organizations have been overcome by competitors that have fast-paced network capabilities on global scales. This explosion of global commerce is possible because of the ever decreasing cost of international communication and transportation brought about by information systems. Also, the relative equality of information available through the presence of the internet and World Wide Web creates a growing knowledge base of world culture, shared by all, which allows for the creation of world-wide standards in global markets, production, coordination, distribution, and global economies of scale.

When developing a global business, there are four basic strategies available. Domestic exporter strategy is when an organization completes most activities in its country of origin and products are shipped out of the country for international sales. Multinational companies concentrate financial and strategy decisions on the country of origin, but decentralize other activities such as production, marketing, and sales to foreign countries. Franchiser strategy is when the origination of an idea or product takes place in a home country, with licensed “clones” being operated on foreign soil with local resources and personnel. Finally, transnational strategy operates all activities on a coordinated global scale. Their management structure closely resembles that of a federal entity, with strong centralized decision making, yet with extensive diffusion of power throughout the global divisions. There is a direct relation between the strategy a firm employs and the information systems design it requires.  Please see figure 15-3 below, taken from our textbook, that explains this relation.

As all information systems have challenges associated with them, global information systems have challenges on a somewhat larger scale based upon their own inherent scope of operations. Some of these challenges include cultural, political, lingual (language diversity), and local information systems that are difficult to integrate. Management solutions for these issues should focus on core systems, those that are absolutely critical for organizational function, and ensure that systems are built and implemented for those business processes that are essential. Furthermore, recalling the key lesson from the previous chapter, managers must manage implementation effectively, especially when dealing with global information systems. For example, legitimacy can be difficult to establish and maintain when you are thousands of miles from your subordinates and have never personally met them. Legitimacy is the authority you derive from your position, experience, and ability to influence others in the design change process. Cultural differences specifically can have a great effect on a change agent’s legitimacy.

These global enterprises and systems would not be possible on such scales without technology. As such, technology platforms must be kept forefront in development of global system requirements. As discussed previously, system integration is one of the main hardware issues that will arise, and to maintain integration, connectivity is essential. A solution for integration issues is to operate with open systems technology, while connectivity problems can be solved by building global networks based upon the Internet, which is exponentially becoming more widespread and reliable. 

Chapter 14: Managing Projects

Summary:

Up to this point, our textbook has shown us What information systems are, Who utilizes them, Where in an organization they should be implemented, and Why they are critical to conducting business today. That is 4 out of the 5 W’s. There is a very high failure rate among IS projects, and chapter 14 answers the question of How to ensure success with information systems projects.

To me, project management consists of three controls; being on-time, on-budget, and on-track. A good project manager accomplishes this by being heavily involved in planning, assessing risk, acquiring resources, organizing, directing, and analyzing results.  Within these activities are five major variables that must be considered: scope, time, cost, quality, and risk.

In the early stages of project management there are typically many different courses of action available for solving problems or improving performance. During this phase, proper selection of which projects to pursue is key to success and should be driven by an organizations overall business strategy. In larger corporations, there is usually a management structure already in place that is responsible for making the decision on which projects will receive priority and deliver the greatest benefit to the company. To help make these decisions, management must have a clear understanding of its information requirements, both in the near-term and the far-term. A tool for the analysis of these requirements is the critical success factors (CSF’s) of managers. Examples of CSF’s include styling, quality, and increased profits. Another useful way for selecting projects is through the use of a scoring model, which assigns weights, or values, to selected criteria and then calculates the total score.

To ensure that a project remains on-budget, a firm must assess the business value of a proposed project in relation to cost and benefits. Benefits can be classified as either tangible, quantifiable or able to be assigned a monetary value, or intangible, not immediately quantifiable such as improved customer service but may lead to gains in the far-term that can be assigned a monetary value. Even in projects where benefits exceed the costs, additional analysis should be utilized to determine the feasibility and overall value of investing in long-term projects. In these situations, capital budgeting models are an effective technique for making these assessments.

As I stated in my review of chapter 8, a well thought out plan always includes a risk assessment. When managing risk in relation to information systems projects, there are three key factors to take into consideration: 1) project size, 2) project structure, and 3) experience with technology. All three are defined in depth in this chapter of our textbook. With the exception of experience with technology, most risk factors are mainly organizational. The highest failure rates are attributed to those that involve enterprise applications or process reengineering because they demand widespread organizational change.

Finally, once a project has been chosen, it must be introduced to the firm through implementation. This refers to all of the actions that are associated with the adoption, management, and routinization of a new information system. This can have a massive impact on a firm’s behavioral and organizational structure and requires careful change management. Vital to this step is the support of management at all levels of the organization. Again, risk factors can rear their ugly heads during the implementation phase of a project but these can be mitigated through the careful application of a combination of internal and external integration tools, formal planning tools, and formal control tools.

Chapter 13: Building Information Systems

Summary:

 The decision to create or invest in a new information system is not to be taken lightly. Its implementation will require major organizational change to jobs, skills, and management. Let us look at four kinds of structural change that a new information system can enable, with varying degrees of risk vs. reward. 

Automation is the most common form of organizational change. This involves technology that increases employee’s efficiency and effectiveness in performing tasks. Rationalization is the streamlining of standard operating procedures. This includes well-known programs such as total quality management and six sigma. Next on the chart is Business process redesign, which focuses on analyzing and then simplifying business processes to restructure workflows and eliminate repetitive tasks. Highest on the risk vs. reward scale are Paradigm shifts. This involves a transformation of the nature of the organization, as opposed to the specific business parts changed by redesign and rationalization. While many companies attempt to exploit the rewards associated with such high risk changes, the vast majority of corporations concentrate on business process management in the hope to achieve spectacular increases in productivity.

The production of new information systems is accomplished through a process called systems development. Systems development includes systems analysis, systems design, programming, testing, and production activities, among others. The purpose of this is to identify a solution for a specific requirement or problem that exists and develop an information system to accomplish it.

When modeling and designing systems, there are two prominent methods: 1) Structured, and 2) Object-oriented development. Structured methods concentrate on step by step modeling processes which are kept separate from data actions. This is accomplished primarily through a tool called the data flow diagram (DFD). These illustrate the processes, external entities, and data stores present in a systems component processes. Object-oriented development combines processes and data together as a collection of objects. They are more effective at modeling data than structured methodologies are; they accomplish this by modeling the systems around the concepts of class and inheritance.

As is becoming evident during my study of this chapter, there are a plethora of approaches for building new information systems. These systems vary in size and complexity in regards to the organizational problems that they are intended to rectify. The oldest method for systems building is the system life cycle process. It focuses on segmenting development into formal stages, but is also considered inflexible because one stage must be completed before the next stage can begin. This also translates into it being a costly and time-consuming process. Other alternative systems-building approaches include prototyping, utilization of application software packages, outsourcing, and end-user development. 

Organizations that exist primarily in the digital environment have a need to be capable of adding or retiring technological capabilities in such a rapidly changing environment. To do this, they rely upon rapid application development (RAD) or agile development to speed up the systems development process. For example, agile development breaks a large project into a set of smaller projects that can be completed quickly and effectively by teams through collaboration and continuous feedback. Other techniques discussed in our textbook include the use of component-based development and the use of web services, which allow multiple systems to communicate regardless of their technology platforms.

Chapter 12: Enhancing Decision Making

Summary:

As the picture above so eloquently states, information is essential for proper decision making. Today, with the availability of information, decision making takes place at almost every level of an organization, to include the strategic, management, and operational levels. There are 4 distinct levels in decision making: 1) Intelligence, 2) Design, 3) Choice, and 4) Implementation. Below is a graphic aid that demonstrates how the process should flow, but it should be noted that if the chosen solution does not work you can return to a previous step and repeat as necessary.

For these systems to work, however, they must be supported by good information quality, management filters, and organizational culture. A great example of how corporate culture can negatively affect decision making would be the catastrophic crash of companies like Enron and WorldCom.

Managers play a key role in decision making within an organization. The textbook states that these roles fall into an interpersonal, informational, and decisional category each. In the Interpersonal role, managers act as leaders and liaisons to subordinates and other organizational levels. When operating in the informational role, they collect and disseminate the most accurate, up-to-date information to those who need it most. Finally, managers make decisions. They are often the first-line problem solvers and negotiators for any conflict or disturbance that may arise.

Business intelligence describes the infrastructure for warehousing, integrating, and analyzing data that comes from the business environment. Business analytics focused on the specific tools and procedures for analyzing data from the business environment. Both are intended to provide correct and relevant information to the decision makers to assist in the decision making process. This is accomplished through the use of functions such as production reports, dashboards, and the ability to create model scenarios and forecasts.

Within an organization, there are generally three main entities of management that exercise decision making powers. These are lower supervisory, middle management, and executive management. Each of them has a different responsibility and utilizes business intelligence in different ways. Supervisory and middle management usually monitor performance and make fairly structured, or repetitive, decisions. They typically use management information systems to support these decisions, and utilize more complex decisions support systems, which include pivot tables and spreadsheets, to handle any unstructured decisions that may fall in their laps. Executives are responsible for strategic decision making, so they utilize executive support systems such as virtual dashboards that display real-time performance information to affect their decisions.

As discussed in the earlier chapters, sometimes the “wisdom of the group” is a powerful tool. Group decision-support systems (GDSS) were created to make these types of work groups more efficient at achieving their goals. GDSS enables groups to increase size and productivity at the same time, which is usually difficult, because contributions are made simultaneously, as opposed to separately. 

Chapter 11: Managing Knowledge

Summary:

The last decade or so has been called the “information age” by many. In fact, we live in an information economy, where the majority of prosperity and wealth is based upon the production and distribution of knowledge and information. Therefore, Knowledge Management is key to any business firms overall business strategy. Now, there is an important difference in data, bits of information about a flow of events or transactions, and knowledge. Knowledge is the use of information, derived from data, which is discovered through the analyzation of patterns rules and contexts. Knowledge Management refers to the business processes of an organization that stores, creates, transfers, and applies knowledge.  A firm’s value is directly related to its ability to do so. The three types of Knowledge Management Systems (KMS) are: Enterprise-wide KMS, Knowledge work systems, and Intelligent techniques.

Enterprise-wide KMS are general purpose tools that manage knowledge organization-wide. They are capable of searching for information and storing both structured and unstructured data. Structured knowledge exists in formal documents and files that are explicitly gleaned. Un-structured data exists in memos, emails, graphics and proposals that are stored in many different locations, in many different formats. Enterprise-wide KMS provide great value to firms as long as they are well designed and accomplish their task efficiently.

Knowledge work systems (KWS) focus on the creation of new knowledge and its application to an existing organization. In essence, they enable the location of tacit knowledge and its transformation to explicit knowledge. KWS have pre-requisites that include easy access to an external knowledge base, computer hardware and support software that is graphics intensive, communication capabilities, and being user friendly. Computer-aided design (CAD) and virtual reality systems are major work applications that can be considered a KWS.

Intelligent Techniques are of great benefit to knowledge management. Expert systems, case-based reasoning, and Fuzzy Logic (a software technology for expressing knowledge in the form of rules with subjective values) are all used to capture tacit knowledge. The other intelligent techniques discussed in our textbook are based upon Artificial Intelligence (AI). These systems include neural networks, genetic algorithms, and intelligent agents (software programs that carry out specific, repetitive, and predictable tasks without direct human intervention). While AI is no substitute for the flexibility and creativity of human intelligence, it is very useful for capturing and codifying organizational knowledge.

Chapter 10: E-Commerce: Digital Markets, Digital Goods

Summary:

The Internet and the World Wide Web has given birth to a new form of commerce, E-Commerce. Since 2010, the percentage of all retail sales in the United States transacted through E-Commerce has grown 12 percent annually. E-Commerce is the digitally enabled commercial transactions that take place over the WWW and the Internet. E-commerce is unique from other forms of commerce because it supports a “marketspace” that is generally available to everyone…all the time. It is cheaper for the customer, for the sole reason that they do not have to spend money on gasoline to physically drive or walk to a store location to buy goods. It eliminates the need for companies to find and pay for shelf space from retailers, and also equalizes the asymmetry of information in the market. Digital goods such as music and software, probably the most popular goods that can be purchased through E-Commerce, can be delivered almost instantaneously over a digital network, eliminating shipping costs.

There are three main ways to classify E-Commerce transactions:  Business-to-Consumer (B2C), Business-to-Business (B2B), and Consumer-to-Consumer (C2C). An example of C2C transactions is the use of EBAY, the online auction site, where people sell their goods to other end-users. Websites use different models to create revenue. These include the advertising, sales, subscription, transaction fee, and affiliate revenue models. All of these are explained in depth in the chapter, but to utilize the EBay example again, they use the transaction fee model by charging the seller a small fee for every successful transaction.

The Internet has transformed the way that marketers identify and communicate with customers. Utilizing the “wisdom of crowds”, where large numbers of people make better decisions than a small group or single individual, organizations are able to connect to their customers on a level unheard of through traditional commerce and ultimately increase customer lifetime value.

B2B E-Commerce represents a large portion of the marketplace, projected to be about $5.1 trillion in 2014 in the United States. B2B transactions are inherently costly and laborious, with some firms estimating that, on average, they spend at least $100 in overheard per purchase order. In contrast, B2B E-Commerce transactions enable companies to locate suppliers, place orders, and track shipments almost cost free and in real-time. This is all usually accomplished through a Private Industrial Network, illustrated below. 

Even newer than E-Commerce is the ubiquitous M-Commerce. This is commerce that takes place on mobile digital platforms, such as IPads, IPhones, and BlackBerrys. The primary focus of these has been based upon location-finding services, utilizing a platforms built-in GPS and compass. Uses include finding nearby hotels, receiving real-time information about weather and traffic, and providing personalized marketing based upon an individuals’ geographical location. Today, M-Commerce platforms can handle almost any type of transaction that other E-Commerce systems can process.

So, do any of these advantages make you want to start your own E-Commerce based website? If so, understand that there are two very important challenges to being successful: 1) developing a clear understanding of your objectives, and 2) choosing the correct technology to meet those objectives. Finally, an alternative could be to outsource your needs and wishes to a professional website builder who is very knowledgeable in constructing E-Commerce sites.

Chapter 9: Achieving Operational Excellence and Customer Intimacy: Enterprise applications

Trying to inject a little humor into this blog…

Summary:

In chapter 2 of our textbook, the authors define Enterprise Systems as a set of software and business processes that integrate previously fragmented data from different systems. This is accomplished by storing all information in a centralized repository where it can be used by all parts of the business or organization. These are also commonly known as enterprise resource planning (ERP) systems and are essential for enabling a business to attain maximum efficiency and evaluate organizational performance.

Falling under the umbrella of ERP systems are supply chain management (SCM) systems. This software allows firms with large scale and complex manufacturing and distribution chains to effectively manage the business processes from producing and procuring raw materials to the final distribution of the finished product to the customer. Most supply chains can be broken down into 2 basic levels. The upstream portion includes the firms’ suppliers and the downstream portion deals with the processes for delivering and distributing the finished product to customers. Below is figure 9-2 from our textbook that illustrates Nike’s supply chain, but keep in mind that it is not to scale, in reality Nike has thousands of suppliers and distributors. 

A common issue with the utilization of SCM systems is the bullwhip effect. This occurs when information about the demand for a product is distorted as it moves through the supply chain processes.  To combat this problem, it behooves a company to consistently audit the accuracy of information passing through the system and being used for decision making. The software that runs SCM systems can be classified as either supply chain planning (SCP) systems or supply chain execution (SCE) systems. SCP’s tell the organization how to model their supply chain, and SCE’s actually direct the flow of products through the supply chain.

Unit 3 of this chapter explains the uses of customer relationship management (CRM) systems in an attempt to “get to know” the customer. CRM software crosses the full spectrum of customer relations, from personal tools that perform specific functions to organizational applications that capture all of the data from interactions with a customer and incorporate it into the other major enterprise systems that an organization uses. This software allows a firm to provide better customer service and better market their products to future customers. CRM software supports either the Operational or Analytical aspects of customer relations. The major CRM software producers include Oracle-owned Siebel Systems, Salesforce.com, and Microsoft Dynamics CRM.

One of the challenges to implementation of Enterprise Applications is a high cost of purchase. Including training, software, hardware, and consulting fees, the price can range into the double digit millions of dollars. Also, a firm must be ready for the fundamental changes to organization and processes that will occur with the introduction of ERP software. In the end, a company must look at whether or not they think the proverbial “juice” is worth the squeeze.