Leveraging on Information Systems for Effective Strategic Management - Coursework Example

Leveraging on Information Systems for Effective Strategic Management Introduction “Changes in the role of information systems have been creating newways of conducting business. It is important therefore that managers are able to identify strategic opportunities offered by information systems that can add value to organizations.” To remain dynamic and competitive in today’s business environment, organizations ought to think in systems mode. Innovation in technology has successfully simplified the collection of data into complex and sophisticated information systems. With apt management information systems established, managers can concentrate on the creative elements of management such as developing strategy, looking for new opportunities and competitive advantage, and maximizing the use of the firm’s resources (Rossetti & DeZoort, 1989). As a logical outcome, no matter how hard people seem to work, the future and success of the organization are still put at high risk. Without the presence of such systems, the results of occurrences will be caused by driver’s which are beyond the manager’s control. Rossetti & DeZoort (1989) further purport that a contemporary business organization must be flexible enough to adapt to changes or be ready for impending failure. Discussion It is crucial that management information systems form an organic part of the array of a firm’s procedures. The way in which a firm manages itself is critical. The simple adoption of information technology is not a clear assurance of success (Bruns & McFarlan, 1987). With effective systems, an enterprise will be better able to determine its strengths and improvement areas and optimize the information it has access to. The system assessment is the starting point for such an effective management system. In addition, a firm can determine of number of information “subsystems,” which should encompass the following: Strategic Management System. The President or the Chief Executive Chief Officer is accountable for defining the basic strategies for attaining the organization’s goals and objectives. While experience plays a crucial role in attaining this task, successful strategies must be consistent with the existing environmental conditions. An effective Strategic Management System (SMS) supplies key decision makers with data necessary to assess the feasibility of a particular strategy, and its effectiveness (historically), given the same conditions. If a specific strategy is not capable of bringing out the expected outcomes, the SMS ought to indicate alternatives on the basis of experience (Bruns & McFarlan, 1987). Executive Information System. Managers with the final accountability for the firm’s performance in specific areas must have dynamic, up-to-date, and accurate data about the status of their assigned area. A critical part of such information is anchored on Strategic Success Factors (SSF), (Tom, 1987). These factors are the critical components on which the success of the organization relies. Next, objective measures are utilized to present quantitative and qualitative measures of the degree to which these factors are being effectively managed. Lastly, a reporting mechanism ought to be established that shall constantly apprise a manager regarding the status of each SSF. This crucial information which forms the core of an Executive Information System (EIS) must be highly accurate, relevant, and timely, to permit managers to intervene whenever required before an unnecessary amount of organizational resources have been wasted or important opportunities have been lost (Tom, 1987). Undoubtedly, such an information system ought to be computer-based. Previously, only a handful of computers were powerful enough to store and process the array of information required to make an EIS feasible and cost-efficient. However, today, even a personal microcomputer is adequate to provide a basic EIS for a medium-sized organization or department (Rossetti & DeZoort, 1989) On the other hand, large complicated may be required to leverage on large mini or mainframe systems. The important point is that the information necessary for managers to make critical decisions about the projects or areas under their jurisdiction is provided in an accurate and timely fashion (Head, 1986). A potent MIS may be helpful in organizing a company and permitting its managers to actually manage. The maximal use of current resources can be attained. Establishing organizational lines of authority and accountability, paired with optimal flow of information is a critical part of an effective MIS. Once in place, the “ideal” system will free managers to manage and permit them to lead the firm towards its overall goals (Head, 1986). As mentioned previously, the CEO is the mentor of strategic planning. He must be on top of what is happening today, and must be able to envision what shall transpire five, ten, and twenty years hence. Moreover, the CEO must be freed of day-to-day decision making so that he may concentrate on strategic issues. The welfare of the whole organization ought to be prioritized over that of any functional unit. The CEO’s main role is to determine the goals and set out the strategic plan to attain them. However, the effective CEO does not have the luxury to shift through and synthesize the data which can be churned out by an information system. CEO’s need special information from external and internal subsystems. It is crucial that the information received by the CEO is deemed relevant. Therefore, the development of a specialized MIS, an executive information system (EIS) is critical to support the CEO’s decision making process (Wysocki & Young, 1990). A powerful EIS has the capability of determining the array of information sources available to the CEO. Two general areas of information encompass: 1) the environment in which the organization operates; and 2) the various internal subsystems of the organization. These sources of information may be in written or oral form. The sources of written information might include: 1) computer reports, 2) memos, 3) letters, 4) periodicals and professional journals, and 5) non-computer reports (Wysocki & Young, 1990). On the other hand, sources of written information might encompass the following: 1) social activities, 2) personal sources of the organization, 3) scheduled meetings, 4) scheduled meetings, 5) unscheduled meetings, 6) telephone calls and 6) business meals (Cook, 1987). The main objective of an EIS is to assemble the reams of data and information from all available sources into a “system” which utilizes this input to help the CEO undertake the following: 1) determine and define the real problems confronting the organization; and 2) address the problems that have been identified. By including such an information system as part of a firm’s MIS, it is plainly acknowledged that a CEO has particular information needs and a special information system is necessary to address them (Cook, 1987). Management Information Systems. A usual firm may be further subdivided into three management levels, namely, strategic, staff, and line. People at each of these levels need accurate and updated information to arrive at effective decisions. Instructions as to what ought to be done in both the short term and the long term must travel from upper to middle and lower management levels. Information about the results of existing operations ought to reach upper level decision makers on a continuous basis. The total flow of information composes the Management Information System (MIS) which is crucial to the efficient operation of any enterprise. An effective means of developing an MIS is to determine across the organization all current functional units (FU); that is, functionally specific areas in which distinguished activities bring about easily recognizable outcomes (Ahituv & Neumann, 1986). For each functional unit, one must first identify all pieces of information necessary to undertake all the unit’s activities, in addition to all the information that are to be produced during such activities. After accomplishing this, a system which integrates each functional unit with all other functional units can be designed and built. Such an information flow accords the network necessary to undertake the organization’s Management Information System (Ahituv & Neumann, 1986). Financial Information System. Decision makers who have particular fiscal accountabilities are specifically concerned with the financial status of all the firm’s parts or components. An effective Financial Information System (FIS) must provide all managers with the information necessary to make critical financial decisions. At the operational level, an efficient accounting system effectively collates, assembles, stores, and disseminates all financial data. The FIS then proceeds to analyze such data and create models that present what may be expected if such conditions exist in the future. A critical advantage of a modern FIS is sensitivity analyses may be undertaken immediately and cost efficiently. Thus, as novel data reflecting the latest events become available, new decisions can be made, and managers can modify their decisions (Information Systems: A Competitive Advantage, 1986). Sales and Marketing Systems. A useful system for an effective sales organization can be constructed through the following parameters: 1) variables under the control of the Sales Manager; 2) input variables affecting the performance of sales persons; and 3) output variables distinguishing the performance of sales persons (Information Systems: A Competitive Advantage, 1986). Each variable from category A will have some prospective influence on each variable in category B. Each variable in category B can in turn influence the performance of sales persons, reflected by the variables in category C. Information subsystems support this system through collection of sales data and further manipulation and reporting of sales data to address the needs of the sales and marketing effort (Getting Ready for Strategic Systems, 1986). The other major component of this subsystem is the collation and retrieval of field intelligence which can be utilized in designing an effective marketing program. Coordination among all sales and marketing activities is improved with the systemization of this information (Getting Ready for Strategic Systems, 1986). Human Resource Management System. The persevering efforts of competent people are one of the most crucial success factors in any firm. Creating the conditions that will both attract and retain personnel with the required combination of skill and experience to carry out all required activities in the organization is a critical task. While sufficient monetary compensation is a basic condition which ought to be addressed, other conditions such as a challenging work environment and adequate material and management support, ought to be addressed to realize the full potential of the workforce. A firm’s personnel must be satisfied without necessarily losing sight of the organization’s overall strategic goals. Therefore, a regular assessment of personnel compensation is necessary. A crucial component of an organization’s Human Resource Information System (HRIS) is such an evaluation, and must consider such factors as employee performance and the existing market value of market contributions (Uncovering Strategic Systems, 1986). Production Control System. In majority of profitable industries, competition among firms providing similar services or products is distinguished by cutthroat competition. An organization may become an industry if it sustains its competitive advantage. On the contrary, failure to remain competitive can break an organization. The basic goal of a Production Control System (PCS) is to guarantee that the quality of the product or service meets the criteria required by consumers or competitors. As with all management tasks, this ought to be built through a system that accords material quality control and standard process control information that is accurate, relevant, and timely ((Uncovering Strategic Systems, 1986). Materials Management System. Inefficient inventory levels gravely impact profit and service to clients. However, the storage of materials in large volumes is costly. One of the critical objectives of a Materials Management System (MMS) is to arrive at a logical compromise between cost of material procurement and storage on the one hand, and cost of material outages on the other. This continuous management decision making is now computerized to a large degree, and materials managers are alarmed to special, aggravating circumstances (Hodge, 1989). Administrative Services Systems. Behind all active functions, there must be a servicing system that accords each function with apt administrative support and also integrates this support. The outcome is for each functional unit supporting and being supported by the rest of the functional units. An Administrative Service Information System (ASIS) is automated to a large extent, cutting down drastically on delays and interference attributed to human errors. However, at the administrative management level, accountability for these services will fall on particular personnel. These managers must thoroughly comprehend the advantages and constraints of all the administrative systems under their control (Keller, 1987). Information Systems, Change and Business Acumen Some companies have failed to recognize that the success of information systems is reliant upon the merging of two characteristics: technology and business acumen. The merging of the two can create a synergetic force that gives the organization a better position from which to take advantage of the opportunities that exist within its operating environment (Krieg & Goslar, 1987). Examples of such opportunities include the following: 1) the creation of barriers to competitors’ entry into the market, such as an online airline reservation system; 2) the building of customers’ switching costs and /or operational dependence to discourage their changing suppliers as in the case of automated order entry systems; 3) completely changing the basis of competition by offering new services, products, or information not offered by competitors; 4) completely changing the organization’s operations in such a way as to change the nature or the environment of the business; and 5) partitioning a business process, such as pricing, that permits a firm to choose an optimal pricing strategy for its products and services (Schultz, 1986). A progressive company must acknowledge the potential of these types of opportunities in order to move in the direction of strategic system development. The focus that a company must maintain to aid in the identification of potential opportunities is one that is outward in nature (Wood, 1988). Strategic systems are frequently viewed as inward looking in that they focus on enhancing the competitive position of the firm by increasing corporate productivity. They should also be outward looking in that they can focus on providing new services or features for customers and/or suppliers. Usually, the case is that systems are designed initially with an inward focus. But as both the system and the MIS group mature, the focus of the system should be directed outward as it becomes apparent that the system has values that can change the external components of the company’s business environment (Uncovering Strategic Systems, 1986). A successful outward looking MIS strategy can be effective for proactive firms. An excellent example is illustrated by an organization with a building supplies division. The division is the supplier of fiber glass insulation to commercial and residential construction firms. The MIS department developed a system of programs that predicted energy costs for varying levels of insulation in different types of buildings. The system was developed at a time when energy costs were extremely high. The programs were given to the building supplies division’s customers. These firms used the system to show their customers that by increasing the amount of insulation in the proposed house or commercial building, yearly costs could be reduced by a specific amount. Benefits accrued for both the building and its customers. The builders increased their revenue while the division also obtained increased sales of their product. More importantly, both gained loyalty from their customers. This is a primary example of how an information system can play a valuable role in attaining the organization’s objectives. The Payoff of the Systems Approach Probably, the most critical payoff of the systems mode of thinking which brings forth effective management systems is the ability to predict the behavior of the system. This gives the firm an enormous increase in it ability to foresee or forestall failure or disaster, or to take full advantage of an opportunity. By carefully observing the organization as a system, together with the systems underlying the system over an adequate time frame, managers may yield a better comprehension of the dynamics of the business’ various subsystems. In turn, this may lead to more accurate predictions of future behavior, which is one of the major goals of effective management information systems (citation). Conclusion and Recommendations Today’s business environment is dynamic. Although an unstable environment is not always a threat to the organization, it can be for those firms that do not constantly monitor the external environment. The organization must be keenly aware of the factors that might affect it strongly and gravely. If not monitored more closely, the dynamics of the environment can significantly contribute to the failure of the organization. They should cease to operate in a reactive, firefighting mode. As the organization’s operations expand, it ought to develop the systems that can capably support such expansion. It has become increasingly apparent that the identification and development of strategic information systems is indispensable. While these systems are usually drafted in close collaboration with the organization’s functional units, the catalyst behind this ought to be the MIS group. It is within this model that technological and information business opportunities can be leveraged on for competitive edge (Lucas, 1986). A second concrete example of the extended role of management information systems is demonstrated in the current integration efforts of many top management groups. These efforts are concentrated on linking the overall business strategic plan with the corporate management information systems plan. The growing budgets allocated for the MIS group are adequate reason for this purpose of integration. More importantly, the synergetic strategic model that emerges from the integration of the interfunctional planning processes can be the catalyst that leads the organization to its strategic objectives (MacFarlan, 1984). As markets grow more complex and global in nature, the role of management information systems within organizations grows more critical. The firm must depend more heavily on the informational and technological advantages that MIS can determine and undertake. The factor that may distinguish a successful organization from the unsuccessful one is the extent of interfunctional integration and communication within the organization (Sen, 1986). It is no longer adequate for the functional business units to have a broad base of knowledge concerning their functional area. Nor is it sufficient for the MIS group to have all the information on the latest hardware and software developments. Rather, it must be essential that there be a convergence of the two. Each group must be familiar with the limitations, concerns and objectives of the other. It requires an educational process to make each unit more adept at steering the organization towards its objectives and goals in the midst of a rapidly changing and extremely competitive environment (Sen, 1986). References “Getting ready for strategic systems.” (1986). EDP Analyzer, Oct, 1. “Information systems: A competitive advantage.” (1986). Modern Office Technology, May, 11. “Uncovering stategic systems.” (1986). EDP Analyzer, Oct, 46. Ahituv, N. & Neumann, S. (1986). Principles of information systems for management. Dubuque, Iowa: Wm. C. Brown Publishers. Bruns, W. & MacFarlan, W. (1987). Information technology put power in information systems. Harvard Business Review, Sept-Oct, 89-94. Cook, R. (1986). Computer Decisions, Sept, 60-63. Head, R. (1986). Infosystems, Oct, 46. Hodge, R. (1989). Integrating systems. Journal of Systems Management, Aug, 18-20. Keller, A. (1987). Infosystems. Jun, 22. Krieg, R. & Goslar, M. (1987). Integrating technology to increase application development productivity. Journal of Systems Management, Aug, 6-14. Lucas, H. (1986). Information systems concepts for management, 3rd ed. New York: Mcgraw-Hill. MacFarlan, F. (1984). Harvard Business Review, May-Jun, 98. Rossetti, D. & DeZoort, F. (1989). Organizational adaptation to technology innovation. SAM Advanced Management Journal, 54, 4, Autumn, 29-33. Schultz, D. (1986). Data Management, June, 23. Sen, D. (1986). Industrial Management Data Systems, Jul-Aug, 5. Tom, P. (1987). Managing information as a corporate resource. Glenview, Illinois: Scott, Foreman and Company. Wood, W. (1988). Principal information systems issues. Journal of Systems Management, Nov, 39-40. Wysocki, R. & Young, J. (1990). Information systems: Management systems in action. New York: John Wiley and Sons. Read More