INFORMATION TECHNOLOGY IN PERSPECTIVE

The frameworks in this chapter are concerned with the way individuals and orga­ nizations apply information technology. They help us understand how technology contributes to individuals and to their workplaces. We also seek to answer the question of where to find value from an investment in IT. We observe a large num­ ber of changes from technology, as evidenced in the discussion of Chrysler Corpo­ ration. Information technology enabled Chrysler to implement two programs: lean production and just-in-time inventory. The results of all these changes have been to complete Chrysler's rescue and return it to profitability. The company's success has been such that in 1998-1999, it merged with Mercedes Benz to form a power­ ful, worldwide automotive giant.

A framework is a conceptual model that helps us understand and communicate about information systems. Information technology covers a vast array of topics; you need a way of thinking about issues in the field to manage IT successfully. A large number of systems have failed to produce benefits because designers did not understand the role of technology in the organization nor the requirements of sys­ tem users. The frameworks discussed in this chapter should help shape the way you think about this broad field called information technology.

FRAMEWORKS FOR INFORMATION TECHNOLOGY

A framework provides you with a way to organize your thoughts and analyze a problem. There is no one theory of information systems and technology, though a user or designer of a system needs some conceptual model of an information sys­ tem. In this text we present several different approaches to frameworks and adopt one for purposes of discussion. It is not essential that everyone adopt the frame­ work we use here. It is important, however, for you to have some conceptual model when making decisions pertaining to these systems.

Decision-Oriented Frameworks

In the previous chapter we discussed the decision-making stages of intelligence, design, and choice proposed by Simon (1965). Anthony (1965) is concerned with the purpose of decision-making activities, whereas Simon stresses methods and techniques. In addition to the stages in Chapter 2, Simon proposes that there are two types of decisions: programmed and nonprogrammed. Programmed decisions are routine and repetitive and require little time spent in the design stage. Entering data into a spreadsheet program is an example of a programmed activity. Nonpro­ grammed decisions are novel and unstructured, for example, deciding on the mar­ keting mix for a set of products. There is no one solution, and much time is spent in design since the problem has probably not appeared before. Clearly, few deci­ sions are at one polar extreme or the other; most fall along a continuum between programmed and nonprogrammed.

48 PART ONE: THE ROLE OF MANAGERS IN INFORMATION TECHNOLOGY

Different types of decision-making technology are suitable for attacking each type of problem. Programmed decisions have traditionally been made by habit, by clerical procedures, or with other accepted tools. More modern techniques for solving programmed decisions involve operations research, mathematical analysis, modeling, and simulation.

Nonprogrammed decisions tend to be solved through judgment, intuition, and rules of thumb. Over time, we expect to see new technology providing more pro­ gramming for nonprogrammed decisions; that is, decisions will tend to move to­ ward the more programmed pole of the continuum.

A Synthesized Framework

A framework synthesizing the work of Anthony and Simon (see Chapter 2) is very appealing because it helps us classify a variety of systems (Gorry and Scott Mor­ ton, 197 1). Table 3- 1 classifies Anthony's decision types from operational control to strategic planning on a scale of structured to unstructured. (Gorry and Scott Morton feel that structured and unstructured are more appropriate terms than pro­ grammed and nonprogrammed.)

In a structured decision, the three phases-intelligence, design, and choice­ are fully structured. In an unstructured decision, all three phases are unstructured. Any decision in between the two extremes is semistructured. As in Simon's frame­ work, the line between structured and unstructured decisions shifts over time as new decision techniques are developed and applied to unstructured problems.

From Table 3-1 , it appears that many information systems have attacked prob­ lems in the structured, operational control cell. These problems are similar in many organizations and are among the most easily understood. It is easier to mechanize these decisions and to predict and achieve cost savings for them than less structured decisions or strategic-planning decisions. Since operational systems are important to the daily functioning of the firm, they are high-priority applications.

Many individuals in the information systems field believe that unstructured de­ cisions have the greatest payoff for the organization. The development of systems for unstructured problems is a major challenge and is undoubtedly more risky than

TABLE 3·1

THE GORRY·SCOTT MORTON FRAMEWORK

Classification Operational control Management control Strategic planning

Structured Order processing, accounts Budgets, personnel Warehouse location,

payable reports transportation

mode mix Semistructured Inventory control, Analysis of variance Introduction of new

production planning product

Unstructured Cash management Management of Planning for R&D personnel

CHAPTER 3: INFORMATION TECHNOLOGY IN PERSPECTIVE 49

the development of comparable systems for structured problems. The goals and design techniques for unstructured decisions differ from those for structured ones. In the structured case, the goal of an information system is usually to improve the processing of information. In an unstructured situation, the goal of the information system is more likely to improve the organization and presentation of information inputs to the decision maker.

We include a large number of technology applications in this text. Organiza­ tions and individuals have been extremely creative in developing new uses for IT. Huge computer complexes support airline reservation systems, for example, while managers in a variety of fields use personal computers for decision support and analysis. A framework such as the Gorry-Scott Morton model can aid our thinking in studying different kinds of systems. What kind of management support does the system provide? What is the nature of the problem?

Adding Organizations and Decisions to a Framework

An expanded framework in light of new IT applications based on the work of Harold Leavitt provides additional insights (Stohr and Konsynski, 1992). Figure 3-1 shows that an organization develops some internal structure so the people who work in the organization can perform their tasks. People undertake these tasks so the firm can accomplish its mission or purpose, such as manufacturing and selling a product or providing a service. This framework separates information technology from the

FIGURE 3·1

50 PART ONE: THE ROLE OF MANAGERS IN INFORMATION TECHNOLOGY

other technology in the firm because Stohr and Konsynski believe IT has become central in linking all parts of the organization and helping it accomplish its tasks.

A significant feature of the framework is the idea that a change in one compo­ nent is likely to cause changes in others. Chapter 4 explores the use of IT to design new kinds of organizations. A change in the environment may force the company to restructure itself-change its tasks and even the number of people who are asso­ ciated with it. Many firms were "restructured" and "downsized" or reduced their numbers of employees to improve profits in the 1990s. Changes in world politics are causing the U.S. government to reallocate defense expenditures. This change in the environment is having a dramatic effect on the defense industry.

Table 3-2 provides more detail on the factors in each component of the frame­ work. For example, there are many ways to structure an organization and there are

TABLE 3-2

ELABORATION OF THE FRAMEWORK Organizational structure

1 . Formal organizational structure (hierarchy, teams) 2. Corporate rOles, responsibilities

3. Corporate goalS, strategy, pOlicies 4. Informal communication structure, culture

5. Formal and informal decision processing mechanisms People

1 . Intrinsic factors: age, education, knowledge, technical skillS, managerial skillS, leadership skills, personality types, cognitive styles

2. Motivational factors: personal objectives, utilities

3. Interpersonal factors: corporate POlitical affiliations, friends, alliances, influence 4. Extrinsic factors: roles, responsibilities, position in organization

Tasks

1 . Management categories: scanning, organizing, motivating, monitoring, controlling 2. Repetitive activities, non repetitive activities

3. Individual level: learning, communicating, deciding, performing Technology

1 . Physical asset structure: land, buildings, plant, equipment 2. Financial asset structure

3. Geographic distribution of resources Information technology

1 . Databases, storage devices 2. Computational capabilities, software 3. Communication capabilities, networks 4. Knowledge bases

5. Information architecture 6. Environment

7. National and global economy 8. Customers, suppliers, competitors 9. Products, substitutes

CHAPTER 3: INFORMATION TECHNOLOGY IN PERSPECTIVE 51

a large number of influences on people. These factors are important to the decision processes in the organization. They affect the way we can use information technol­ ogy to help the organization achieve its objectives.

A FRAMEWORK BASED ON IT

Changing Technology and Applications

The purpose of employing any technology is to obtain an advantage over old ways of doing business. The frameworks above were developed around early information systems that made use first of computer and then communications technology. These early frameworks can be improved by taking into account the explosion of worldwide computer networking. Individuals and organizations have shown tremendous initiative in finding ways to apply information technology to improve their operations, gain a competitive advantage, provide personal productivity tools for employees, and even change the very structure of the organization. IT today is a vehicle for making substantial changes in organizations, markets, and the economy.

Processing Transactions

Today most transactions processing systems operate on-line, and a number of computer vendors compete for the business of providing hardware and software for on-line transactions processing (OLTP) systems. Whenever a customer in a store uses a credit card for a purchase above a certain amount, the merchant places the card in a reader that sends data recorded on the magnetic strip on the back of

Vanity Fair manufactures a variety of cloth­ ing products, from Lee and Wrangler jeans to women's undergarments. The company is a leader in computerized market-response systems, systems that restock a retailer's shelves as quickly as possible. Vanity Fair often restocks within three days of an order while Levi's can take a month to supply new product. The company began by connecting its computers to those of retailers like Wal­ Mart and J.C. Penney. VF provides hun­ dreds of styles to thousands of outlets; its communications center has some 40 floor­ to-ceiling terminals that technicians use to control the network.

Every night Wal-Mart sends data col­ lected on register scanners in 21 00 outlets

to Vanity Fair. VF then restocks the stores automatically based on what was sold that day. If VF has the product in stock, it is shipped the next day so that within three days the new jeans are on the shelf. If the item is not in stock, the VF computer orders a replacement that is man ufactured and shipped within a week. Another advantage of this system is that the retailer only replen­ ishes products that are selling. Since the items in stock are what the customer wants, there are fewer clearance sales. The chair­ man of VF credits the system, which han­ dies half of its jeans orders, with giving the company the largest market share in the jeans business.

52 PART ONE: THE ROLE OF MANAGERS IN INFORMATION TECHNOLOGY

the credit card to a central transactions processing computer. The merchant enters the amount of the purchase, and the computer looks up the customer's record to determine if a purchase of that amount is authorized. If so, the computer sends back an authorization number to the merchant. No matter what happens between the credit card company and the customer, the merchant is assured of receiving payment from the credit card company after following the authorization process. Modern systems initiate a transfer from the credit card company account to the merchant's account based on the authorization, so the merchant receives payment very quickly.

Transactions processing systems handle vast amounts of data, much of which convey little interesting information to a manager. However, summaries of transac­ tions data are often useful. For example, a summary of sales by product and terri­ tory from a sales database could be very valuable for a marketing executive or brand manager. Today companies are creating "data warehouses" that contain huge amounts of operational data; they try to discover useful information by sift­ ing or "mining" these data. Transactions systems are the backbone of many infor­ mation systems in firms.

Decision Support, Executive IS, and Expert Systems

Information technology can be used to support decision making in the organiza­ tion as well as process transactions. Managers running spreadsheet programs on their personal computers to decide whether to launch a new product or make a particular investment are using the computer for decision support. There are also special cases of decision-support systems eDSS) known as group DSS and execu­ tive information systems eElS), which are DSS designed specifically to support top management. Expert systems provide support in another fashion: They cap­ ture the knowledge of an expert and encode it in a computer program so the knowledge can be more widely shared. We discuss decision support systems in Chapter 2 1 and expert systems in Chapter 22.

Knowledge Worker Support

Large mainframe computers rarely feature applications that enhance the productiv­ ity of the typical manager. One of the great appeals of personal computers is the software available for personal productivity. Office software such as spreadsheets, word processors, database packages, presentation graphics programs, and organiz­ ers turn a PC into a manager's workstation. Many of these same functions are portable through very small notebook computers and personal digital assistants like the Palm Pilot, devices which are capable of exchanging data with a larger personal computer.

Supporting Groups and Cooperative Work-Groupware

One of the most exciting uses of technology is the support of group and cooperative work. When individuals in different locations need to communicate with each other to