Thomson Learning© 2004 8-1

Chapter Eight

Information Technology and Control

Thomson Learning© 2004 8-2

Evolution of Organizational Applications of Information

Technology

1. Operations

2. Business Resource

3. Strategic Weapon

• Transaction processing systems• Data warehousing

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

• Knowledge Management• Intranets• Enterprise resource planning

• Extranets• E-Commerce• Integrated Enterprise

INTERNAL EXTERNAL

LOW SYSTEM COMPLEXITY HIGH

Direction of InformationSystemEvolution

MANAGEMENTLEVEL

TOP(strategy, plans,

non-programmed)

FIRST-LINE(operational, past,

programmed)

Thomson Learning© 2004 8-3

A Simplified Feedback Control Model

Set Strategic Goals

Measure Actual Performance and

Compare to Standards

Take Corrective Action

as Needed

Establish Standards of Performance

Thomson Learning© 2004 8-4

Major Perspectives of the Balanced Scorecard

MissionStrategy

Goals

Internal Business ProcessesDoes the chain of internal activities and processes add value for customers andshareholders?Examples of measures: order-ratefulfillment, cost-per-order

FinancialDo actions contribute to improving financial performance? Examples of measures: profits, return on investment

Learning and GrowthAre we learning and changing?

Examples of measures: continuous process improvement, employee retention, new product introductions

Customers

How well do we serve our customers?

Examples of measures: customer satisfaction, customer loyalty

Sources: Based on Robert S. Kaplan and David P. Norton, “UsingThe 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; andCathy Lazere, “All Together Now,” CFO, February 1998, 28-36.

Thomson Learning© 2004 8-5

Example of ERP Network

Central Database

Financial andAccountingSales

Distribution

Purchasing

Inventory andManufacturing

Human Resources

Thomson Learning© 2004 8-6

Two Approaches to Knowledge Management

ExplicitProvide high-quality, reliable, and fast

information systems for access of codified, reusable knowledge

TacitChannel individual expertise to provide creative advice

on strategic problems

KnowledgeManagement

Strategy

People-to-documents

Develop an electronic document system thatcodifies, stores,disseminates, and allowsreuse of knowledge

Invest heavily in informationtechnology, with a goal ofconnecting people withReusable, codified knowledge

Person-to-person

Develop networks forlinking people so thattacit knowledge canbe shared

Invest moderately ininformation technology,with a goal of facilitatingconversations and the ex-change of tacit knowledge

Technology

Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney,“What’s Your Strategy for Managing Knowledge?” Harvard BusinessReview, March-April 1999, 106-116.

Thomson Learning© 2004 8-7

Electronic Data Interchange for International Transactions

Export FreightForwarder

Manufacturer’sBank’

ExportCustoms

ImportCustoms

ImportClearing Agent

CustomerMANUFACTURER

Customer’sBank

Suppliers

Thomson Learning© 2004 8-8

Key Characteristics of Traditional vs. Emerging Interorganizational

Relationships

Traditional InterorganizationalRelationships

Emerging InterorganizationalRelationships

Suppliers

Customers

Arm’s-length relationship

Use of telephone, mail, someEDI for ordering, invoicing, payments

Direct access to manufacturer,real-time information exchange

Electronic access to product information, consumer ratings,customer service data

Limited communication withmanufacturer

Mix of phone response, mailhard copy information

Interactive, electronic relationship

Electronic ordering, invoicing,payments

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.