Lecture 2/Session 2 Key Information Technology Systems in Organizations

© Andrew Schwarz, 2002 Slide 1

Introduction

 While we have talked about technology and systems in a broad context, we have yet to understand the different type of information systems that rely upon information technology  This lecture will discuss the key information systems in organizations © Andrew Schwarz, 2002 Slide 2

Unanswered Questions

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What are the different types of systems by organizational level?

What are the different types of systems by functional area?

How do organizations integrate all of the systems?

What is the application of this lecture for you, as a manager, in the digital age?

© Andrew Schwarz, 2002 Slide 3

Question #1: What are the different types of systems by organizational level?

© Andrew Schwarz, 2002 Slide 4

Organization Levels

Organizational Level Types of Managers STRATEGIC LEVEL SENIOR MANAGERS MANAGEMENT LEVEL MIDDLE MANAGERS KNOWLEDGE LEVEL KNOWLEDGE WORKERS OPERATIONAL OPERATIONAL LEVEL MANAGERS SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN MARKETING RESOURCES

Systems by Org Level

    Operational level: systems monitor the elementary activities and transactions of the firm – Transaction Processing Systems Knowledge level: systems support knowledge and data workers – Knowledge work systems/Office Systems Management level: systems support monitoring, controlling, decision-making, and administrative activities – Management Information Systems/Decision Support Systems Strategic level: systems that support long-range planning activities – Executive support systems © Andrew Schwarz, 2002 Slide 6

Transaction Processing Systems

 Computerized systems that perform and record the daily routine transactions necessary to conduct the business  Users: operations personnel; supervisors  Examples: accounts payable, accounts receivable, payroll, order tracking, order processing © Andrew Schwarz, 2002 Slide 7

Knowledge Work Systems

 Systems that aid knowledge workers in the creation and integration of new knowledge in the organization  Users: professionals, technical staff  Examples: engineering systems, graphics systems, 3-D systems © Andrew Schwarz, 2002 Slide 8

How do Firms Capture Knowledge?

 Knowledge management: the set of processes developed in an organization to create, gather, store, maintain, and disseminate the firm’s knowledge – Senior executive in charge of KM: CKO  Types of knowledge: – – Structured knowledge, such as product manuals External knowledge of competitors, products, and markets (competitive intelligence) – Tacit knowledge—knowledge in the minds of the employees © Andrew Schwarz, 2002 Slide 9

Importance of Knowledge

 As stated in Lecture 1, the dominant workers are knowledge workers  So, if all companies were given the same amount of resources, raw materials, locations, etc., what would be the source of competitive advantage for that firm?

– The knowledge within the employees!

 Thus, firms are seeking to capture and retain that knowledge so that they can have a sustainable competitive advantage © Andrew Schwarz, 2002 Slide 10

Systems Used to Capture Knowledge  Expert system: captures the expertise of a human in limited domains of knowledge – Rules-based capture—if this happens, then I would make this decision – Similar to a DSS, but is built upon human knowledge  Some companies attempt to use artificial intelligence (AI) and neural networks so that the systems learn from their history – Problems with AI!

© Andrew Schwarz, 2002 Slide 11

Intelligence

 Above knowledge is intelligence, or carrying out the knowledge through implementation  Companies are ultimately attempting to create intelligent agents – Software programs that use a knowledge bask that carry out tasks for users or complete business tasks © Andrew Schwarz, 2002 Slide 12

Office Systems

 Computer systems that are designed to increase the productivity of data workers in the office   Users: Clerical workers Examples: – Word processing: facilitate the creation of documents (e.g. Microsoft Word) – Desktop publishing: produces documents combining output from various sources (e.g. Microsoft Publisher) – Document imaging systems: convert documents and images into digital form so they can be stored on the computer © Andrew Schwarz, 2002 Slide 13

Decision Support Systems

 Systems that combine data and analytic models or data analysis tools to support nonroutine decision making for individuals – Use input from TPS data plus external sources  Users: Professionals; staff managers  Examples: sales region analysis, cost analysis, pricing analysis © Andrew Schwarz, 2002 Slide 14

Types of DSS

 Model driven: stand-alone system that uses models to perform “what-if” and other kinds of analyses  Data-driven: system that relies upon information within databases to make decisions, but is not configured with a model in mind © Andrew Schwarz, 2002 Slide 15

Components of a DSS

TPS DSS Database External Data User Interface User DSS Software System Models OLAP Tools Datamining Tools

© Andrew Schwarz, 2002 Slide 16

Group Decision Support System (GDSS)

 An interactive computer-based system to facilitate the solution to unstructured problems by a set of decision-makers working together as a group  The group uses software tools to help it arrive at a decision – – – – Questionnaire/voting software Electronic brainstorming tools Idea organizer Electronic meeting system © Andrew Schwarz, 2002 Slide 17

Differences between DSS/GDSS

 Users – DSS: individuals; GDSS: groups  Objective of use – DSS: build models using data; GDSS: facilitate interaction between individuals  Effectiveness – DSS: depends on how well the tool is built by designers; GDSS: depends on facilitators, tools selected, and participants © Andrew Schwarz, 2002 Slide 18

Management Information Systems

 Systems that support managers as they plan, control, and make decisions – Summarize and report on a company’s basic operations—not day-to-day, but trends  Users: middle managers  Examples: annual budgets, capital investment analysis, analysis of sales data (aggregated from TPS) © Andrew Schwarz, 2002 Slide 19

Example of Relationship Between TPS and MIS

TPS Order Processing System ORDER FILE Materials Resource Planning System PRODUCTION MASTER FILE General Ledger System ACCOUNTING FILES SALES DATA UNIT PRODUCT COST PRODUCT CHANGE DATA EXPENSE DATA MIS FILES MIS MIS REPORTS MANAGERS

Executive Support Systems

 Systems designed to address nonroutine decision making – Incorporate data from TPS, MIS, DSS, and other external sources  Users: senior managers  Examples: trends in the marketplace, forecasting, personnel planning © Andrew Schwarz, 2002 Slide 21

Systems by Level and Decision Type

TYPE OF DECISION STRUCTURED SEMI STRUCTURED UNSTRUCTURED OPERATIONAL ORGANIZATIONAL LEVEL KNOWLEDGE MANAGEMENT ACCOUNTS RECEIVABLE ELECTRONIC SCHEDULING PRODUCTION COST OVERRUNS TPS OAS MIS BUDGET PREPARATION PROJECT SCHEDULING DSS FACILITY LOCATION KWS PRODUCT DESIGN STRATEGIC ESS NEW PRODUCTS NEW MARKETS

Relationship Between Systems

ESS MIS DSS KWS OAS

© Andrew Schwarz, 2002

TPS

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Question #2: What are the different types of systems by functional area?

© Andrew Schwarz, 2002 Slide 24

Systems by Functional Unit

 Sales/Marketing: Systems that help the company identify customers; develop, promote, and sell products/services; and provide customer support    Manufacturing/Production: Systems that deal with the planning, development, and production of products/services and with controlling the flow of production Finance/Accounting: Systems that keep track of the firm’s financial assets/fund flow Human Resources: Systems that maintain employee records; track employee skills; job performance and training; and support planning for employee compensation and career development © Andrew Schwarz, 2002 Slide 25

Examples of Systems by Functional Areas

System

Order Processing Market Analysis Pricing Analysis Sales Trends Sales/Marketing

Description

Enter, Process, Track Orders Identify Customers & Markets Determine Prices Prepare 5-year Forecasts

Organizational Level

Operational Knowledge Management Strategic Manufacturing

System

Machine Control Computer-aided-design Production Planning Facilities Location

Description

Control Actions Of Equipment Design New Products Decide Number, Schedule Products Decide Where To Locate Facilities

Organizational Level

Operational Knowledge Management Strategic

Examples of Systems by Functional Areas Finance/Accounting

System Description

Accounts Receivable Track Money Owed To Firm Portfolio Analysis Budgeting Profit Planning Design Firm's Investments Prepare Short Term Budgets Plan Long-term Profits

Organizational Level

Operational Knowledge Management Strategic Human Resources

System

Training/Development Career Pathing Design Employee Career Paths Compensation Analysis Monitor Wages, Salaries, Benefits HR Planning

Description

Track Training, Skills, Appraisals Plan Long-term Labor Force Needs

Organizational Level

Operational Knowledge Management Strategic

An Emerging Sales/Marketing System  Given the proliferation of companies (from our discussion in Session 1), keeping and retaining customers is becoming more crucial  To help keep track of customers, companies are turning to customer relationship management (CRM) software – Coordinates all of the business processes for dealing with customers © Andrew Schwarz, 2002 Slide 28

Question #3: How do organizations integrate all of the systems?

© Andrew Schwarz, 2002 Slide 29

Are These Systems Separate?

In the discussion thus far, we have treated the systems as being separate from one another Manufacturing Business processes Accounting Business processes Manufacturing Systems Accounting Systems Finance Business processes Finance Systems Marketing/Sales Business processes Marketing/Sales Systems HR Business processes HR Systems

Traditional Views of Systems

 Reality check: systems are (and need to be!) integrated  So how do companies integrate systems?

– Build their own patches – Use enterprise systems, or firm-wide information systems that integrate key business processes so that information can flow freely between parts of the firm [also known as ERP, or Enterprise Resource Planning systems] © Andrew Schwarz, 2002 Slide 31

Enterprise View of Systems

Manufacturing Accounting Vendors Business Processes Enterprise-wide Business Processes Human Resources Sales & Marketing Finance Customers

Why would Firms use an ERP?

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Creation of one unified organization—no more stovepipes Automation of manually-intensive processes Better reporting and decision making— knowledge is in the hands of the knowledge workers Unified technology platform More efficient company and customer driven business © Andrew Schwarz, 2002 Slide 33

Why do Firms Not Use an ERP?

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High up-front cost 2.

Challenge of implementation 1. Only 10-15% of implementations are smooth 3.

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Systems are inflexible—they define the processes and your organization must change how you do work Tough to find the strategic value © Andrew Schwarz, 2002 Slide 34

Question #4: What is the application of this lecture for you, as a manager, in the digital age?

© Andrew Schwarz, 2002 Slide 35

Top 3 Applications From This Lecture 1.

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Are there processes in your organization that need to be automated?

Are you thinking at the strategy level for technology—do you see areas where technology could help your firm grow?

How integrated are your systems? Are your tasks repetitious (do you have to re enter data already in another system?)?

© Andrew Schwarz, 2002 Slide 36