Chapter 1: Information Systems in

Business Today
 Chapter 1:

Information Systems in
Business Today

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 Learning Objectives

• Why are information systems so essential for running and managing a business
today?
• What exactly is an information system? How does it work? What are its people,
organizational, and technology components?
• How will a four-step method for business problem solving help you solve
information system–related problems?
• What information systems skills and knowledge are essential for business careers?

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 How Information Systems are Transforming Business?

• In 2018, more than 150 million businesses had (.com or .net) addresses registered.
• 180 million people read news online; 220 million use a social networking site.
• Internet advertising continues to grow at around 15 percent per year. Facebook’s ad revenue
hit $55 billion in 2018, and Google’s online ad revenues surpassed $116 billion.
• New laws require businesses to store more data for longer periods.
• Email messages, employee chemical exposure data, etc.
• Changes in business result in changes in jobs and careers.

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 What’s new in IST?
New technologies
• Cloud computing / software as a service (SaaS)
• Big Data and Internet of Things (IoT)
• Artificial Intelligence (AI)
• Mobile digital platform
Management
• Managers use social networks, collaboration.
• Business intelligence applications accelerate.
• Virtual meetings proliferate.
Organizations
• Social business
• Telework gains momentum
• Co-creation of value, collaboration across firms
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 Globalization Challenges and Opportunities

• Internet and global communications have greatly reduced economic

and cultural advantages of developed countries.
• Drastic reduction of costs of operating and transacting on global scale
• Competition for jobs, markets, resources, ideas
• Dependence on imports and exports
• Requires new understandings of skills, markets, opportunities

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 Business Drivers of Information Systems

• Businesses invest in IT to achieve six important business objectives.

1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
6. Survival

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 Business Drivers of Information Systems

1. Operational Excellence:
• Improved efficiency results in higher profits.
• Information systems and technologies help improve efficiency and productivity.
• Example:
• Amazon, the largest online retailer on earth, generating more than $232 billion in sales in 2018,
invested $2.1 billion in information systems so that when one of its estimated 300 million users
searches for a product, Amazon can respond in milliseconds with the correct product displayed (and
recommendations for other products).

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 Business Drivers of Information Systems

2. New Products, Services, and Business Models:

• Information systems and technologies enable firms to create new products, services, and
business models.
• Business model: how a company produces, delivers, and sells its products and services
• Example: Apple
• Transformed old model of music distribution with iTunes
• Constant innovations—iPod, iPhone, iPad, and so on

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 Business Drivers of Information Systems

3. Customer and Supplier Intimacy:

• Customers who are served well become repeat customers who purchase more.
• Mandarin Oriental hotel
• Uses IT to foster an intimate relationship with its customers, keeping track of
preferences, and so on
• Close relationships with suppliers result in lower costs.
• JCPenney
• IT to enhance relationship with supplier in Hong Kong

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 Business Drivers of Information Systems

4. Improved Decision Making:

• If managers rely on forecasts, best guesses, and luck, the result is over or under
production of goods and services, misallocation of resources, and poor responses
times.
• Real-time data improves ability of managers to make decisions.
• Verizon: Web-based digital dashboard to update managers with real-time data
on customer complaints, network performance, and line outages.

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 Business Drivers of Information Systems

5. Competitive Advantage:

• Often results from achieving previous business objectives

• Advantages over competitors:
• Charging less for superior products, better performance, and better
response to suppliers and customers
• Examples: Apple, Walmart, UPS are industry leaders because they know
how to use information systems for this purpose

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 Business Drivers of Information Systems

6. Survival:
• Businesses may need to invest in information systems out of necessity; simply the cost
of doing business.
• Keeping up with competitors
• Citibank’s introduction of ATMs in 1977
• Federal and state regulations and reporting requirements
• Toxic Substances Control Act and the Sarbanes-Oxley Act

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 What is an Information System?

An information system (IS) can be defined technically

as a set of interrelated components that collect,
process, store, and distribute information to support
decision making, coordinating, and control in an
organization.

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 What is an Information System?

• Information system: Interrelated components that manage information to:

• Support decision making and control.
• Help with analysis, visualization, and product creation.
• Information technology: The hardware and software a business uses to achieve
objectives.
• Data: Streams of raw facts.
• Information: Data shaped into meaningful, useful form.

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 Data and Information

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 • Activities in an information system that produce
information:
• Input: Captures or collects raw data from within the organization
or from its external environment.
Input Process Output
• Processing: Converts this raw input into a meaningful form.
• Output: Transfers the processed information to the people who
will use it or to the activities for which it will be used. Feedback
• Feedback: Output that is returned to appropriate members of the
organization to help them evaluate or correct the input stage.

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 Functions of an Information System

An information system contains

information about an organization and
its surrounding environment. Three
basic activities—input, processing,
and output—produce the information
organizations need. Feedback is
output returned to appropriate people
or activities in the organization to
evaluate and refine the input.
Environmental actors, such as
customers, suppliers, competitors,
stockholders, and regulatory agencies,
interact with the organization and its
information systems.

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 Dimensions of an Information System

Using information systems effectively

requires an understanding of the
organization, people, and information
technology shaping the systems. An
information system provides a solution to
important business problems or challenges
facing the firm.

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 Dimensions of an Information System

• Organizations
• Coordinate work through structured hierarchy and business processes.
• Hierarchy of authority, responsibility
• Senior Management
• Middle Management
• Operational Management
• Data Workers
• Production or Service Workers
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 Dimensions of an Information System

• Organizations (contd.)
• Separation of business functions
• Sales and Marketing
• Human Resources
• Finance and Accounting
• Manufacturing and Production

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 Dimensions of an Information System

• Management
• Information systems require skilled people to build, maintain, and use them.
• Employee attitudes affect ability to use systems productively.
• Role of managers
• Perceive business challenges.
• Set organizational strategy.
• Allocate human and financial resources.
• Creative work: new products, services.

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 Dimensions of an Information System

• Technology
• IT Infrastructure: Foundation or platform that information systems built on
• Computer hardware
• Computer software
• Data management technology
• Networking and telecommunications technology
• Internet and Web, extranets, intranets
• Voice, video communications

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 The Problem-Solving Approach

• Few business problems are simple or straightforward.

• Most business problems involve a number of major factors that can fall into three main
categories:

• Organization

• Technology

• Management

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 A Model of the Problem-Solving Approach

• Problem solving: four-step process

1. Problem identification

2. Solution design

3. Choice

4. Implementation

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 A Model of the Problem-Solving Approach

1. Problem identification includes:

• Agreement that problem exists
• Definition of problem
• Causes of problem
• What can be done given resources of firm

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 A Model of the Problem-Solving Approach

2. Solution design
• Often many possible solutions
• Consider as many as possible to understand range of
solutions
3. Solution Evaluation and Choice: Factors include
• Cost
• Feasibility given resources and skills
• Length of time needed to implement solution

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 A Model of the Problem-Solving Approach

4. Implementation
• Building or purchasing solution
• Testing solution, employee training
• Change management
• Measurement of outcomes
• Feedback, evaluation of solution
• Problem solving is a continuous process
• Sometimes chosen solution doesn't work or needs adjustment

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 A Model of the Problem-Solving Approach

• During implementation and thereafter, the

outcome must be continually measured and
the information about how well the solution is
working is fed back to the problem solvers. In
this way, the identification of the problem can
change over time, solutions can be changed,
and new choices made, all based on
experience.

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 The Role of Critical Thinking in Problem Solving

• Without critical thinking, easy to jump to conclusions,

misjudge a problem, and waste resources
• Critical thinking:
• Sustained suspension of judgment with an awareness
of multiple perspectives and alternatives

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 The Role of Critical Thinking in Problem Solving

• Four elements of critical thinking:

1. Maintaining doubt and suspending judgment

2. Being aware of different perspectives

• Including technology, organization, and people perspectives

3. Testing alternatives and letting experience be the guide

4. Being aware of organizational and personal limitations

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 How Information Systems Will Affect Business Careers

• Accounting
• Finance
• Marketing
• Operations management in services and manufacturing
• Management
• Information Systems

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 How Information Systems Will Affect Business Careers

• Accounting:
• Accountants increasingly rely on information systems to summarize transactions, create
financial records, organize data, and perform financial analysis.
• Skills:
• Knowledge of databases and networks
• Online financial transactions and reporting systems
• How systems are used to achieve accounting functions

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 How Information Systems Will Affect Business Careers

• Finance:
• Relationship between information systems and financial management and services is
so strong that many advise finance majors to co-major in information systems.
• Skills:
• Use systems for financial reporting, direct investment activities, implement cash
management strategies
• Plan, organize, implement information systems strategies for the firm

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 How Information Systems Will Affect Business Careers

• Marketing:
• No field has undergone more technology-driven change in the past five years than
marketing and advertising.
• Skills:
• Work with databases for tracking and reporting on customer behavior, product
performance, customer feedback, product development
• Enterprise systems for product management, sales force management, customer
relationship management
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 How Information Systems Will Affect Business Careers

• Operations management in services and manufacturing:

• Production managers, administrative service managers, and operations analysts
• Skills:
• Hardware and software platforms for operations management
• Use database and analytical software for coordinating and optimizing resources
required for producing goods and services

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 How Information Systems Will Affect Business Careers

• Management:
• The job of management has been transformed by information systems.
• Impossible to manage business today without information systems.
• Skills:
• Use of information systems for each function of job, from desktop
productivity tools to applications coordinating the entire enterprise

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 How Information Systems Will Affect Business Careers

• Information systems:
• Fast changing and dynamic profession because information technologies are among most
important tools for achieving business firms’ key objectives
• Domestic and offshore outsourcing
• Skills:
• Uses of new and emerging hardware and software to achieve six business objectives
• An ability to take a leadership role in the design and implementation of new
information systems
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 How Information Systems Will Affect Business Careers

• Common requirements for all majors

• How IT helps achieve six business objectives
• Central role of databases
• Business analytics and intelligence systems
• Working with specialists and systems designers
• Ethical, social, legal environment and issues
• Use of IT to meet legal requirements

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