Chapter 15: Managing Global Systems

The world just keeps getting smaller and smaller. We must adapt to changing faces, literally, of our competition and devise a plan to bring our organizations into its view. Globalization is possible even with very small businesses because of the technological advances in computer networks and telecommunications.

Perhaps the most important challenge facing corporations and companies wanting to open foreign markets is that of the global culture. We’re beginning to share more culture because of increased telecommunications and the Internet. However, when you are merging two entities, one domestic and one foreign, into one business, the culture of that merged organization can be an important influence on how well the company does.

Advanced telecommunications systems now allow companies to work around the clock and around the world. Companies may choose to locate parts of their corporate offices in other countries because they fit better with the corporation’s overall global strategy in that location.

Global businesses must devote their time and attention to understanding the cultures of countries in which they want to do business. Not only must they merge their business units, they must also merge their people into a cohesive team.

If you thought building an information system for an organization doing business only in the U.S. was tough, then think about how difficult it is to mesh a system built on 1990’s technology with one that was built in the 1980’s and one built in 2012.

First you decide what you’re going to do; choose a strategy. Then you have to organize your business around this strategy. The last step is to build the system that will incorporate the first two. There are four main global strategies that businesses can use to organize their global efforts:  domestic exporter, multinational, franchiser, and transnational. The global strategy will help determine the information system structure.

A company must decide how its business processes are divided among global, regional, and local units. Which location does each process better than the other? Carefully analyze each task and all available resources to support the process in each location. It may be surprising to learn that it’s cheaper and more efficient to store manufactured goods separately from where they are produced.

As technology continues to make our world smaller, companies must continually adapt both domestically and around the world.  Creating and manufacturing goods and services around the world and selling those same products and services anywhere in the world is a huge draw for many companies that see their domestic markets stagnate or shrink.

Management’s biggest task is to manage the changes that must take place in a global company. The changes are more difficult and complex because of the added characteristics of politics, culture, and language.

So…….why do companies even attempt to build themselves into global merchants? Because the potential payoff can be enormous!

Chapter 14: Managing Projects

Just as you can analyze the benefit of purchasing a new piece of equipment for your business, you can analyze the impact of an information system. Questions to ask: Just how will it benefit the business overall? What benefits will your customers gain from the new system?

However, you can’t reduce everything to dollars and cents. Sometimes the benefits of the new system will be measured in other ways; you can use different methods to evaluate a new information system, just as you would a new storage system for widgets.

One of the more difficult choices to make when evaluating new systems is to determine the tangible benefits versus the intangible benefits. Example…When a financial institution must decide whether to offer online banking; it may evaluate the system using a method and determine that it will cost half a million dollars to implement. The immediate cost savings of not having employees deal directly with customers may be only $250,000. One might say that the new system is not worth the cost; the bank will lose $250,000. But the intangible benefits the bank customers may enjoy could potentially be worth a million dollars. In that case, the new system’s intangible benefits will far exceed the tangible benefits.

Potential new systems should be evaluated in terms of costs, tangible and intangible. All costs, hardware, software, and persware, should be included in the bottom line so that the organization can truly determine the gains, or losses, associated with the changes that will take place.

Now…just because a new system proposal looks good on paper, meets the financial model requirements, shows positive tangible and intangible benefits, and is approved by senior management, doesn’t mean it will be a success. Sometimes design, data, cost, and operations known as potential system failures can deter progress.

Ever heard the saying “If it’s too good to be true, it probably is.” If the implementation team make the project details and scope seem easy and cheap, that’s too good to be true. If the techies tell you that it will be a piece of cake, you might want to dig deeper. If the non-techies say they don’t have anything to worry about, you may want to worry.

You have to anticipate problems and be ready to solve them. No system yet designed has been problem-free. When you understand and accept that implementing a new information system shouldn’t be that different from implementing any other type of new system, you utilize some of the same principles to guide you through the process.

Communicate, communicate, communicate, up and down the chain of command. Just because you don’t tell anybody, the bad news won’t go away.

Managing the change in the organizational structure that results from implementing a new system is as important as managing the system itself. Use the appropriate internal and external integration tools to control the risk factors. Design the system implementation with the whole organization in mind allowing mostly for the human factor.

Chapter 13: Building Information Systems

It would be nice if we could have a precise checklist of how to establish an e-commerce organization design plan, but we can’t. No one can. This chapter provides information that can be used to help plan and analyze organization changes for e-commerce and other areas.

The triangle is back…..Hardware, Software, and Persware. All three elements will pose their own unique challenges to managers. Successfully reorganizing the company relies on more than just bringing in new equipment and new programs. Understanding and incorporating the social and political climate in any plan is one of the most important aspects.

Too many companies buy the hardware they think is necessary for a new or improved information system. Then they purchase some software to go along with the new hardware. Now they realize their hardware is inadequate for the new software, so they buy more hardware. The vicious cycle continues.

The problem is that too many companies don’t have a plan for integrating new hardware and software purchased into their overall business plan, let alone meshing them with the persware side of the triangle. The information plan should support the overall business plan and not conflict with it. The plan must include all levels of the organization, including the strategic and executive levels.

Business Systems Planning (BSP), uses the “big picture” approach. You look at the overall organization and figure out how each unit, each function, all the processes, and each data element fits in; like a jigsaw puzzle. The biggest drawback to BSP is that it only asks questions about current processes and current uses of information; this is not enough for integrating e-commerce and new technologies.

Change is hard on people and organizations. But it’s one of those necessary evils that keep companies in the lead or helps destroy them. The most common forms of organizational change are automation and rationalization. These relatively slow-moving and slow-changing strategies present modest returns with little risk. Reengineering and paradigm shifts are faster and more comprehensive changes that carry high rewards with substantial chances of failure.

Systems development includes every resource and every step that goes into producing an information system that solves problems or helps organizations take advantage of new opportunities. Structured and Object-Oriented Methodologies are two designing systems that can be used in planning the systems.

Supply and demand…..the supply of technical specialist is not enough to support the demand for new systems, or maintenance of the old ones. Something has to fill the gap; this is why we see so many new and advanced methods on the market.

New methods of developing systems are continually being introduced. These new technologies:  rapid application development, joint application development, component-based development, and Web services are reducing the time, effort and cost for businesses and organizations of supplying employees, customers and suppliers with the information they need.

Chapter 12: Enhancing Decision Making

Each of us makes hundreds of decision every day. If just a fraction of those decisions could be improved through increased and better information and better processes, we’d all be delighted. Businesses feel the same way. Customers would be happier, employees would be more motivated, and managers would have an easier job. The more useful information you have, based on internal experiences or from external sources, the better your decisions.

Business decision making involves the following different levels of business:

·         Senior Management: makes long-term decisions based on internal and external information

·         Middle Management and Project Teams: decisions affect resources and short-range plans

·         Operational Management: decisions affect resources, schedules, and personnel

·         Individual employees: decisions affect vendors, employees, and customers

The different types of decisions made are: unstructured requiring judgment and insight into situations, structured which are repetitive with procedures, and semistructured that are a combination of the first two usually made by middle managers.

Stages of the decision-making process involves: intelligence and understanding the problem, design and exploring solutions to the problem, choice and choosing solution alternatives, and implementation that chooses the solution and monitoring how well it’s working.

Since we no doubt have had to make decisions in the real world, you know for a fact that the process is not as cut-and-dried as what we’ve discussed so far. Three reasons why the whole process can blow up at any moment: information quality is inaccurate, management filters are biased, and organization inertia occurs when people will do anything to keep the status quo.

The goal is to match the four decision-making levels along with the types of decisions to the appropriate kind of Decision Support System (DSS). DSS helps executives make better decisions by using historical and current data from internal information systems and external sources of data.

More and more, companies are turning to teams to get work done. Hours upon hours are spent in meetings, group collaborations, and communicating with many people. To help groups make better decisions, Group decision-support system (GDSS) was developed.

You’ve been there: a meeting where nothing was decided, people dominated the agenda, and some said nothing; it dragged on for hours. Companies have been struggling with this problem for years. They are now using GDSS to increase efficiency and effectiveness of meetings.

GDSS is more than hardware, it includes conference facilities, audiovisual equipment, and networking equipment that connects everyone. These electronic meeting systems allow people to review the agenda items in advance, information generated in the meeting is saved for future use, and because input is anonymous ideas are evaluated individually.

Making decisions can be difficult at best and managers used to rely on their instincts and best-guesses. Instead of guessing, managers and employees can now base decisions on facts and a more structured methodology thereby saving resources for the company.

Chapter 11: Managing Knowledge

Creating and using knowledge is not limited to information-based companies: it is necessary for all organizations, regardless of industry. It’s not enough to make good products; companies must make products that are better, less expensive to produce, and more desirable than those of competitors’. Using corporate and individual knowledge assets wisely will help companies accomplish this.

There are important dimensions to knowledge; there is more to information than just bits and bytes. A company must have the knowledge to transform information it gathers into meaningful concepts to improve the environment for its employees, suppliers, and customers. Wisdom is using information to solve problems and knowing how to apply knowledge.

Knowledge Management is referred to as the set of business processes developed in an organization to create, store, transfer, and apply knowledge. To understand the concept of knowledge management, think of knowledge as a resource, just like buildings, equipment, designs, and money. All these resources need to be actively managed.

In the knowledge management value chain, storing involves document management systems, knowledge acquisition uses data mining to gather information and knowledge application is about building new processes for its suppliers and employees or new products for its customers.

With so many sources of information and knowledge available, how does an organization go about collecting, storing, distributing, and applying it all? Organizations can create centralized knowledge repositories by building upon document management systems and including information from structured and semistructured knowledge systems. Companies save money by placing information pertaining to the subject matter experts in a directory that all employees can access.

Joe, a mechanic in Oklahoma, needs to fix a radiator in an old car. He can’t remember what bolts he needs. He uses his computer to access an intranet through the companies enterprise portal, clicks the type car, the type repair, and downloads the most current information to fix the part. He also has access to videos, warnings, best practices, and experiences from other mechanics. Instead of hours it might have taken Joe to look through a manual, he can finish the job in less than half a day.

Knowledge Work Systems (KWS) support the creation and integration of new knowledge that is beneficial to the organization. KWS are often used by and support professional employees such as engineers, researchers, and analysts. The requirements of a KWS include access to: graphic tools, analytical tools, communication tools, and document management tools. Examples of KWS are Computer-aided design (CAD) used to build new products or improve products, Virtual reality systems are sophisticated imagery that makes you feel like you’re right there, and virtual reality modeling language that has specifications for interactive 3-D modeling.

While managers will experience some challenges in implementing and using a Knowledge Management System, the benefits can be worthwhile. Start small, measure the ROI every step of the way, and make sure users are satisfied with the system or they won’t use it.

Chapter 10: E-commerce: Digital Markets, Digital Goods

About 20 years ago, the lines between an organization and its customers, suppliers, and partners were clear. A business wasn’t expected to make very much, if any, information available to anyone else outside the corporation. Production was totally separate from finance and the human resources division wasn’t connected to manufacturing. That is no longer the case in today’s business world. In order to remain competitive, businesses are expected, if not required, to make most, if not all, information available across all divisions and to the outside world.

To explain the changing economics of information, let’s say you’re ready to buy a car. You’ve checked the prices and information on various Web sites and secured a good deal because of your research. Now, you need a loan and insurance for the new car. Your bank loan seems high and your insurance agent’s rate also seems high. But wait. You check out the Web sites and find a better loan rate and better insurance rate. Because you were able to gather information from the Internet rather than traveling from business to business, your search costs were lower.

The bank and insurance company no longer had the advantage of information asymmetry; you had access to more information to compare pricing. The richness and reach of information on the Internet has allowed businesses and consumers to establish new types of relationships.

E-commerce is divided into three categories that distinguish the types of transactions that take place:

·         Business-to-consumer (B2C): most visible; involves retailing products to consumers.

·         Business-to-business (B2B): greatest dollar amount of transactions; sales of goods.

·         Consumer-to-consumer (C2C): greater geographic reach; consumers selling to consumers.

There are many products and services offered through traditional web sites, and as businesses continue to expand the reach of the Internet to wireless devices, they are creating new ways to offer products and services through handheld wireless devices known as mobile commerce or m-commerce.

The emerging digital company now has more opportunities to reach customers, suppliers, and partners through the Internet. The Internet has given digital companies the opportunity to create new business models or reshape current models. New models include: web portals like Google to track preferences and online retail stores called e-tailers used to check inventory and make orders.

Digital companies need money too, so various revenue sources have been explored – from running advertisements, such as, banner ads, to developing their own digital goods, like ebooks, special reports, even programs and web utilities. Most companies use a combination of the following revenue models: advertising, sales, subscription, transaction fee, and affiliate.

The last thing you want to do is throw up a web page, include an e-mail address, and call it done! You have to determine how your electronic commerce efforts will best fit your current business processes. Some companies have built a Web site without thinking through the entire process only to find out they have seriously hurt their normal operations.

Facts to remember: It’s not cheap, It’s not easy, it’s not fast.

Chapter 9: Achieving Operational Excellence and Customer Intimacy: Enterprise Applications

Over the last decade businesses have come to realize how important it is to totally integrate business processes across the enterprise. In today’s fast-paced world, managing information assets is more important than ever before. This chapter discusses how important it is for information to be available in every nook and cranny of an enterprise.

Done correctly, enterprise systems can offer big rewards; done incorrectly can cause a company huge headaches, loss of business, employee turmoil, and wasted dollars. Changes in an enterprise system can be tremendous:

·         A more uniform organization: more disciplined approach to business regardless of physical location or organization structure.

·         More efficient operations and customer-driven business processes: focus more on the customer.

·         Management: improved management decisions, a comprehensive view of performance.

Enterprise systems force a company to fully integrate all business processes. The changes helps the company automate many of the steps in the process instead of having to do everything manually.

Oh, for the days when the old saying “the customer is the king” was just a catch phrase. Now, it’s an absolute reality and companies that don’t live up to the phrase will pay for it. There are no more separate entities or distinct line in the sand when it comes to integrating supply chains. It’s more like shifting sand.

Supply chain planning systems can provide information up and down the chain and help everyone involved do a better forecasting job. It enables companies to: generate demand forecasts, develop sourcing and manufacturing plans, share information about changes easier and faster, coordinate activities with supply chain partners, and develop better demand planning.

The goals of Customer Relationship Management (CRM) Systems are to optimize revenue, profitability, customer satisfaction, and customer retention. Many companies are overloaded with data about customers. CRM systems are utilized to consolidate this information and then provide it to the customer touch points. By offering a consolidated viewpoint of the customer to these touch points; a company can cater to the customer that offers the most profitability.

Developing and using metrics to measure the effectiveness of implementing supply chain management systems is very important. One of the most important metrics is the customer lifetime value (CLTV). Again, the CLTV is information that helps determine the profitability of a customer.

The return on investment to companies that implement enterprise systems can be enormous in terms of better information to suppliers, employees, customers, and business partners. Management challenges will be a rough ride: daunting implementation, high up-front costs and future benefits, inflexibility, and realizing strategic value.

All the challenges of implementing a new enterprise system are directly related to people; many companies fail to understand this fact.