Chapter Eight

Information Technology and Control

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Evolution of Organizational Applications of Information Technology

TOP (strategy, plans, non-programmed)

3. Strategic Weapon
INTERNAL EXTERNAL Knowledge Extranets Management E-Commerce Intranets Integrated Enterprise resource Enterprise planning

2. Business Resource
MANAGEMENT LEVEL

1. Operations
Transaction processing systems Data warehousing FIRST-LINE (operational, past, LOW programmed)

Management Information systems Decision Support Systems Executive information systems Management control systems Balanced Scorecard

Direction of Information System Evolution

SYSTEM COMPLEXITY
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HIGH

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A Simplified Feedback Control Model

Set Strategic Goals

Establish Standards of Performance

Take Corrective Action as Needed Measure Actual Performance and Compare to Standards

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Major Perspectives of the Balanced Scorecard

Financial

Do actions contribute to improving financial performance?

Examples of measures: profits, return on investment
Customers Internal Business Processes

How well do we serve our customers? Examples of measures: customer satisfaction, customer loyalty

Mission Strategy Goals

Does the chain of internal activities and processes add value for customers and shareholders? Examples of measures: order-rate fulfillment, cost-per-order

Learning and Growth

Are we learning and changing? Examples of measures: continuous process improvement, employee retention, new product introductions
Sources: Based on Robert S. Kaplan and David P. Norton, Using The Balanced Scorecard as a Strategic Management System, Harvard Business Review, January-February 1996, 71-79; Chee W. Chow, Kamal M. Haddad, and James E. Williamson, Applying the Balanced Scorecard to Small Companies, Management Accounting 79, No. 2 (August 1997), 21-27; and Cathy Lazere, All Together Now, CFO, February 1998, 28-36.

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Example of ERP Network

Sales Financial and Accounting

Human Resources

Central Database

Purchasing

Inventory and Manufacturing

Distribution

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Two Approaches to Knowledge Management

Provide high-quality, reliable, and fast information systems for access of codified, reusable knowledge

Explicit

Channel individual expertise to provide creative advice on strategic problems

Tacit

People-to-documents
Develop an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge Invest heavily in information technology, with a goal of connecting people with Reusable, codified knowledge

Person-to-person

Knowledge Management Strategy Technology

Develop networks for linking people so that tacit knowledge can be shared Invest moderately in information technology, with a goal of facilitating conversations and the exchange of tacit knowledge

Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, Whats Your Strategy for Managing Knowledge? Harvard Business Review, March-April 1999, 106-116.

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Electronic Data Interchange for International Transactions

Manufacturers Bank Customers Bank

Suppliers

MANUFACTURER

Customer

Export Freight Forwarder

Import Clearing Agent

Export Customs

Import Customs

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Key Characteristics of Traditional vs. Emerging Interorganizational Relationships

Traditional Interorganizational Relationships
Arms-length relationship Suppliers

Emerging Interorganizational Relationships

Interactive, electronic relationship Electronic ordering, invoicing, payments Direct access to manufacturer, real-time information exchange Electronic access to product information, consumer ratings, customer service data

Use of telephone, mail, some EDI for ordering, invoicing, payments

Customers

Limited communication with manufacturer Mix of phone response, mail hard copy information
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Source: Based on Charles V. Callahan and Bruce A. Pasternack, Corporate Strategy in the Digital Age, Strategy & Business, Issue 15, Second Quarter 1999, 10-14.

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