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Summary of Chapter 14

Summary of Chapter 14. Information System Value and Financial Strategy. The IS Value Issue. Some companies have a difficult time articulating the value of an increasingly large amount of money being spent on Information Systems. Is This Really an Issue?.

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Summary of Chapter 14

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  1. Summary of Chapter 14 Information System Value and Financial Strategy

  2. The IS Value Issue Some companies have a difficult time articulating the value of an increasingly large amount of money being spent on Information Systems.

  3. Is This Really an Issue? 1. It is a big deal and the IS organization is being challenged to answer the value question while being denied additional funding. 2. It is a medium issue but there are other business issues that are considered more important so the IS organization has not yet been impacted financially. 3. It is not a current issue within the organization.

  4. The Challenge To convince senior management that IT is contributing to the success of the business and needs to continue to be funded appropriately!

  5. The Evolution of Information Systems Justification Evolution of Financial Strategy Initiation Expansion Control Maturity I II III IV Application Support Motivation Financial Justification DP Planning Organization Organizational Strategy Single Area Proliferation Containment People Displacement Cost Avoidance Competitive Advantage DP Efficiency Business Case Installation Audit Charge-Out System Management Process Budget Little Reactive Directed Proactive Centralized Decentralized Distributed Finance Dept. Multiple Dept. Centralized Based on material from Gibson and Nolan, Harvard Business Review, January-February 1974, pp. 76-88.

  6. Justification of IS Stage I: Most organization address funding for information systems as part of the budget. The challenge is to accomplish as much as possible with the existing IS resource without exceeding the budget. A possible problem with this approach is that a limited budget can curtail the possible and logical use of information systems within the organization.

  7. Justification of IS Stage II: The rapid growth of IS and increasing use and cost of IS prompts establishing a business case proposal process followed by a post-installation audit. This attempts to establish appropriate priorities for new IS projects. The post install audit objective is to validate that what was proposed was actually accomplished. A problem with this approach is that the business case is a snap-shot in time.

  8. IS Justification Stage III: Objective: To put the burden of financial responsibility on the people (departments or business functions) who are using the IS. The logic of this approach is that if people are willing to pay for the use of information systems then it must be justified. The problem with this approach is that senior management can conclude that it is simply shifting money from the IS organization to user departments.

  9. IS Justification Stage IV: A management process is an attempt to provide a better way to articulate the value of information systems geared to factors that are important to the success of the business. This could be efficiency, effectiveness or competitive advantage. While viewed as a possible necessary step, this approach will entail time and money to create the process.

  10. Information Systems Do Not Produce Value Directly Information Systems Value to the Business Business Change

  11. Conclusions An important consideration as to whether this will become an important issue is whether senior management is likely to hit a pain threshold regarding the amount spent on Information Systems.. Meanwhile, should the IS organization try to anticipate the need to establish a process that does a better job of answering questions regarding the value of information systems to the organization.

  12. Possible Exam Questions • What is the IS value issue? • Name three ways a company derives value from Information Systems? • Is there a process that monitors the effectiveness of Information Systems?

  13. Chapter 15 Summary Integrating IS into the Business Plan

  14. Chapter Objectives • Understanding importance of integrating I/S • planning into business planning process. • 2. Realizing that the success of a planning approach depends on making it a priority within a company while implementing a necessary process to make it happen.

  15. Drivers Influence Planning

  16. Major Planning Challenges • What to do • Important to know where the company • is going. • Making it happen • Can be difficult because it frequently • involves changes.

  17. Strategic Planning Model Mission Vision Environment (External) Strategic Plan Tactical Plan Business Plan Opportunities Threats Detailed Projects Resources: Headcount, Capital and Expense Budgets Business Unit Functional Programs Major Projects Goals Objectives Strategic Positioning Enterprise (Internal) Strengths Weaknesses Culture (Explicit/Implicit) Figure15-3

  18. Barriers to Aligning IS with Business Objectives Business Plan? I/S Track Record and Credibility? Communication of Business Plan? Senior Management Perception of I/S? Executive Skills of I/S Executive? Is keeping I/S aligned with the business objectives someones high priority objective? Clear I/S Role? Effective I/S Management? I/S Organization? I/S Policies? A Problem with I/S Capacity? I/S Skills and Capabilities? Does the I/S Organization Have a User/Business Focus? Managing I/S to Business Objectives? Figure 15-5

  19. Business - IS Planning Opportunities Technology Environment Corporate Strategy Business Strategy Dictates I/S Strategy 1) Strategic Capability 2) Technology Driven Business Change Benefits Determines Information Technology Figure 15-7

  20. Enterprise-Wide Information Systems Strategic Planning Process Business Domain Information Technology Domain Information Technology Opportunities Impact Strategic Plan Organization Opportunity Business Processes and Organization Information Systems Architecture and Organization Alignment Parker/Trainor/Benson, INFORMATION STRATEGY AND ECONOMICS, (c)1989, p.5. Adapted by permission of Prentice Hall, Upper Saddle River, New Jersey Figure 15-8

  21. Conclusions 1. Planning is a tool. There is an organizational learning curve regarding methodologies. 2. A good plan with no execution borders on a waste of the entire effort. 3. A relatively weak plan with a few strong thoughts followed by tenacious implementation can provide major business benefits.

  22. Possible Exam Questions 1. Discuss the importance of business and information systems planning in today’s dynamic business environment? 2. Identify and explain reasons why Information Systems planning often fails within an organization.

  23. Chapter 16 Introduction Total Quality Management And The Role of Information Systems

  24. Chapter Overview • Total Quality Management • Case Study: Xerox and TQM • Fundamentals of TQM • TQM and Reengineering • Role of IS in TQM program • TQM implementation challenges

  25. Total Quality Management (TQM) A specific emphasis program, comparable to process reengineering, focused on providing quality to the customer.

  26. Case Study: Xerox • Successful in 1960’s. • In danger of going out of business in 1982. • Japanese competition • 1989 award for outstanding quality • TQM – “Leadership Through Quality”

  27. Fundamentals of TQM • Meeting customer expectations • Quality is a management process to run the business. • Fine tuning will not change anything of any significance in most cases. • A new management process, attitude and culture are often required. • The core problem is managing a massive change in organizational behavior.

  28. Considerations for a TQM Program • People • Enablers of quality • Business processes • Focal point of a TQM program • Efficiency, effectiveness, competitive advantage • Results of a successful TQM program

  29. TQM and Reengineering Difference: TQM program frequently improves what is already in place, while a reengineering effort advocates an entirely new approach, a new beginning, and a rejection of the traditional way of doing things.

  30. Role of IS in a TQM Program • Pursuit of quality and operational performance goals need to be based on reliable information, data and analysis. • Use of data and analysis involves the creation and use of performance indicators. • Effective measurement strategy.

  31. Challenges in Implementing a TQM Program • Importance of leadership and direction. • Changing the company culture. • Addressing employee attitude problems. • Choosing the best people. • Understanding the business problems. • Developing a compensation system.

  32. Conclusions • A company’s fortunes can rest on its ability to provide superior quality products. • TQM does not guarantee immediate, ultimate or sustainable business success. • TQM can be implemented within an organization without information systems being a major role, but it can make a positive contribution and produce performance measurements.

  33. Chapter 16 Total Quality Management and The Role of Information Systems

  34. A Definition of Quality “Quality” is conformance to customer wants, needs and expectations, at a price he or she will pay.

  35. Total Quality Management Of the three letters in TQM, the T is most important. Total says that you maintain a balanced focus on major business factors and business results while guarding against becoming process myopic.

  36. A Case Analysis Leadership Through Quality at Xerox or Finding a Way to Save the Company that Had Once Owned an Industry and Was the Darling of the Stock Market

  37. Xerox 914 Introduced in 1959, the 914 copier was a money machine nonpareil. It was also arguably the finest product ever produced by any company since it combined four technologies: chemical, optical, mechanical and electronics. By the time it was retired in 1973, it was the biggest-selling industrial product of all time, and Xerox was in the dictionary as a synonym for photocopy. Success spoiled Xerox. To sustain its rapid growth, it needed to move beyond copiers, but what could ever measure up to the 70% gross profit margins of the 914?

  38. Xerox History Quality Circles Began Fuji Xerox Won Deming Award Leadership Through Quality Initiated Won Baldridge Award Benchmarking Started 914 Copier Introduced Competition Increases Continuous Improvement 1959 1972 1979 1980 1983 1989 1990s Source: Xerox Corp. Figure 16.1

  39. Off the Benchmark Indirect/Direct Ratio 2X Production Suppliers 9X Assembly Line Rejections 10X Product Lead Time 2X Defects Per 100 Machines 7X

  40. Quality Through LeadershipProgram at Xerox The strategy was for a cultural change that enabled and empowered people with quality tools and processes to: 1. Meet customer requirements. 2. Achieve business priorities. 3. Continuously improve.

  41. The Plan for Leadership Through Quality • 1983--the year of start-up activities • 1984--the year of awareness and understanding • 1985--the year of transition and transformation • 1986--the year when results would achieved • 1987--the year of approaching maturity

  42. Xerox Policy Statement • Xerox is a quality company. • Quality is the basic business principle for Xerox. • Quality means providing our external and internal customers with innovative products and services that fully satisfy their requirements. • Quality is the job of every Xerox employee.

  43. Xerox’s Outcome Initially: • Failed to focus adequately on core work processes and statistics. • Plan was not integrated with business processes. • Not tuned to the company culture and the need to change it. • Did not pick the right quality czar at the start. • Did not push the operating units hard enough.

  44. Xerox’s Outcome Finally: • Found the right cure to the ills of the company. • Quality was the right solution at the right time. • Had a committed senior management • IS was used effectively to complement changes. • Employee compensation was tied to quality. • The pursuit of the Baldridge Award was an energizing effort within the company.

  45. Important Supporting Elements Recognition and Reward Tools and Processes Transition Team Xerox is a Total Quality Company Senior Management Behavior Communi- cation Training Source: Xerox Corp. Figure 16-3

  46. Information Systems Support • Xerox had over 375 major information systems supporting the total business. • Over 175 of these systems related specifically to the management, evaluation and planning of quality. • The validity, accuracy and timeliness of information systems are assured by the use of a Data Systems Quality Assurance process during the design, construction and major upgrade of each information system.

  47. What Xerox Did Right 1. It made an appropriate diagnosis of how to cure the ills of the company. 2. Quality was the right process for the right solution at the right time. 3. The necessary commitment was made by senior management. 4. A constituency was built starting at the top in a very calculated and deliberate way.

  48. 5. Information systems use was effectively aligned with its business objectives and processes to achieve them. 6. Executive compensation was tied to quality. 7. Innovations and successes of the TQM program were well publicized. 8. The pursuit of the Baldridge Award was an energizing effort within the company. 9. It achieved measured results.

  49. Product and Operations Quality Results Production Line Defective Parts Defects Per 100 Machines Production Suppliers Reduced Reduced Reduced 10X 10X 15X Source: Xerox Corp., Reprinted with permission Figure 16-2

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