Download Chapter 14 Value of Information Systems to an Organization

Chapter
15
Value
of
Information
Systems
to
an
Organization
1.
Objectives
1.1
1.2
Understand the value of information as an asset of an organization.
Recognise how information systems can promote competitive edge of an
organization.
Aware how information systems can contribute to the success of strategy
1.3
1.4
implementation in an organization.
Acquire an understanding of different types of information systems that can
add value of an organization.
Value of
IS
Value of
IS to an
Organization
IS in Enhancing
Competitive
Advantages
KMS
BIS
Types of
IS Systems
DW
DM
2.
Value of information to an organization
2.1
DEFINITION
2.2
OLAP
AI
(a)
An information system (IS) can be described as the system with
elements of people, data, records and activities for the purpose of
capturing, manipulating and distributing the data and information that
are necessary to perform the activities in an organization.
(b)
Information is data that has been processed into a meaningful format
for use by decision makers within an organization.
Information should have a value to the user over and above the cost of
obtaining that information. Information is a key resource to an organization
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and can serve organization’s information needs in the following aspects:
(a)
(b)
(c)
(d)
(e)
planning and corporate strategy development for management.
control and monitoring performance to ensure that work has been
carried out as planned.
decision making for managers of different levels.
recording and processing transactions that can affect significantly the
working relationships within an organization.
communication of information within an organization and with
external parties.
(A)
Planning and corporate strategy development
2.3
The planning process incorporates several stages, all of which require
information. The stages of developing corporate strategy and plans are as
follows:
(a)
Establish mission based on the culture and developments in an
organization’s environment.
(b)
Perform background situation analysis based on results of past
activities that contributes to evaluate different alternatives.
(c)
(d)
Set measurable objectives by converting the results of background
situation analysis into company’s financial standards and requirements.
Develop strategies (策略) define the long-term ways of achieving the
(e)
objectives. Information required for developing strategy covers a wide
range of subjects, but not in detail.
Develop tactics (戰略) based on the directions provided by corporate
strategy. Tactics are short-term ways to achieve success with the
strategies. Information required for developing tactics is more detailed
and specific than strategic information.
(f)
Develop operational plans for managers of different functional areas.
Operations plans are detailed and specific and show the ways that the
tactics will be carried out. They define who is responsible for
implementing the plan, and when each operation will be completed.
For example, production managers require information such as
expected sales, cost of prime costs and overheads, lead time of raw
materials for preparing production budgets and production schedules.
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(B)
Control and monitoring
2.4
Information will be needed to ensure that each aspect of the plan has been
successfully carried out, and so it is important to gather this information.
2.5
For example, technique for responsibility accounting system can be used by
operation manager to measure performance by tracing unfavorable
performance to the department or individual that causes the inefficiencies.
(C)
Recording and processing of information
2.6
Business processes are directly associated with providing goods and services
2.7
to customers. Managers obtain information from an information system to
help them manage the business processes.
Therefore, an information system must be able to capture and record business
2.8
activity data, to process data, to store and maintain data, and to report
information to management.
For example, a data warehouse obtains information from various processing
systems and external sources and place data into the warehouse, and then the
data that extracted from the data warehouse can be analysed using reporting
and query tools to produce specific management reports.
(D)
Communication among people
2.9
The introduction of intranet system has enabled organization to contribute to
communicate vast amounts of information to its workforce and among people.
Electronic communication systems have permitted many organizations to
develop a management structure that provides a wider span of control (管理幅
度).
(亦稱控制幅度（span of management）或監督幅度（span of supervision）。
是指一位主管能夠有效直接監督幾個部屬，或向同一位主管直接報告的部
2.10
屬人數。一位主管監督部屬人數愈多，控制幅度就愈大；反之，監督部屬
人數愈少，控制幅度就愈少。一位主管之控制幅度應該多大，學者們一直
未能達到共識。主管的控制幅度愈大，其底下管理階層愈少，可以降低成
本、縮短溝通路線。但是幅度過寬時，主管在其管理的極限下，難以有效
地監督其底下的每一位管理者。因此，最理想的控制幅度應該是能夠有效
運作所有的人力資源。)
2.11
The development of communication links, wide area networks, and digital
telephone lines has led to encouraging employees to communicate not only at
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office, but also at home. The enhancement of communication in the workplace
can make the business processes more efficient.
2.12
KEY POINT
Information is valuable strategic resources for:
(i)
the use of decision makers;
(ii)
communicating with others;
(iii)
serving the information needs; and
(iv)
gaining competitive advantage.
2.13
Test your understanding 1
Information is a key resource to an organisation and can serve its information
needs in the following respects:
1.
Planning and corporate strategy development for management.
2.
Control and monitoring performance to ensure that work has been
carried out as planned.
3.
Decision making for managers at different levels.
4.
Recording and processing transactions that can affect significantly the
working relationships within an organization.
5.
Communication of information within an organisation and with
external parties.
An information system of an organisation supplies relevant information and
compiles appropriate analysis for the purpose of providing assistance to
management in developing and implementing corporate strategies.
REQUIRED:
(a)
(b)
List the SIX stages of developing corporate strategy and plans.
(6 marks)
How do information systems contribute to the success of the
implementation of corporate strategy?
(4 marks)
(Total: 10 marks)
(HKIAAT Paper 8 Principles of Auditing and Management Information
Systems Pilot Paper B3)
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3.
Strategic Significance of Information Systems in Enhancing
Competitive Advantages
3.1
The overall objective of most companies is to create value. Organization and
individuals that provide goods and services their value will survive and grow
while those who do not will shrink.
Information systems are increasingly being utilized to develop a strategy that
gains competitive advantage for a company.
3.2
(A)
IS as a tool to enhance competitive advantages
3.3
Information system serves as a tool to enhance competitive advantages of an
organization in the following ways:
(a)
Enhance efficiencies and effectiveness of business processes:
(i)
The adaptation of just-in-time (JIT) systems to enhance
efficiencies by reducing the number of staff required to deliver
the same service or by speeding up the service delivery.
(ii)
Bank increase the opportunities of providing services to
customers through the use of e-banking and ATMs in locations
where there is no branch.
(b)
Formulate appropriate corporate strategy to maintain market
position
(i)
Once a customer has established a familiarity with one system
of e-banking system, gaining advantage from it, there will be
switching costs to switch to another system.
(c)
Maintain external linkage to improve customer relationship
(i)
Some companies may be more successful at creating value
because they elicit quality responses from their customers and
use the feedback to quickly change or upgrade their products.
(ii)
The implementation of electronic data interchange (EDI)
systems is beneficial to a company reduced delivery times and
increased accuracy of information.
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3.4
KEY POINT
IS as a tool in enhancing competitive advantages so as to add value to an
organization in terms of:
(i)
reducing costs by improving efficiencies and effectiveness of business
processes;
(ii)
enhancing market position by implementing an appropriate business
strategy, and
(iii)
promoting customer relationship.
4.
Types of IS to Enhance Value of Information
4.1
Quite a number of information systems can enhance the value of information
in contemporary organization, for example:
(a)
knowledge management system (KMS),
(b)
business intelligence system (BIS),
(c)
data warehouse (DW),
(d)
data mining (DM),
(e)
online analytical processing (OLAP), and
(f)
artificial intelligence (AI).
(A)
Knowledge management system (知識管理系統)
4.2
DEFINITION
Knowledge management system is a system that comprises a range of
practices used in an organisation to identify, create, represent, distribute and
enable adoption of what it knows, and how it knows it.
4.3
4.4
4.5
Knowledge management programs are typically tied to organisational
objectives such as improved performance, competitive advantage, innovation,
developmental processes, lessons learnt transfer (for example between projects)
and the general development of collaborative practices.
Knowledge management is frequently linked and related to what has become
known as the learning organisation, lifelong learning and continuous
improvement.
Knowledge management has always existed in one form or another. Examples
include on-the-job peer discussions, formal apprenticeship, discussion forums,
corporate libraries, professional training and mentoring programs. However,
with computers becoming more widespread in the second half of the 20th
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century, specific adaptations of technology such as knowledge bases, expert
systems, and knowledge repositories have been introduced to further enhance
the process.
4.6
Benefits:
(a)
Sharing of valuable organizational information.
(b)
Improved communication among people.
(c)
Reacting quickly to changes in the internal or external environment.
(d)
Avoiding re-inventing the wheel, reducing redundant work.
(e)
Retaining intellectual property after the employee leaves if such
knowledge can be codified.
(f)
Decreasing turnover by lessening employee frustration.
(g)
(h)
4.7
Providing consistent service to internal and external customers.
Providing employees with potential for increased success, and give
employees more time to be innovative and proactive.
Limitations:
(a)
Inefficient processes for capturing knowledge – data on knowledge can
be difficult to obtain or simply captured but not adequately
cross-referenced.
(b)
Failure to appreciate the knowledge – If a knowledge worker is
unaware of the existence of this data then will not be used. Some form
of central knowledge registry may be required to keep track of all of
(c)
(d)
the organization’s knowledge.
Difficulty of measuring intangible benefits – measuring the costs of
implementing a new information system is relatively easy, as the costs
tend to be tangible. However, many of the benefits, especially in the
area of increased product quality or better customer service, tend to be
intangible.
Information overload – care is need in planning information systems to
ensure that only the required ‘quality’ output is produced, rather than
producing reports simply because they are available resulting in
information overload for the recipient of that information.
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4.8
Test your understanding 2
(a)
(b)
(c)
Briefly describe KMS.
List two benefits of KMS.
List two limitations of KMS.
(3 marks)
(2 marks)
(2 marks)
(HKIAAT Paper 8 Principles of Auditing and Management Information
Systems Pilot Paper C3(g),(h)&(i))
(B)
Business intelligence system (商務智能係統)
4.8
DEFINITION
BIS refers to technologies, applications and practices for the collection,
integration, analysis, and presentation of business information and sometimes
to the information itself.
4.9
4.10
Types of business intelligence applications include functions of analyzing
performance, projects, or internal operations; storing and analyzing data; and
analyzing or managing the “human” side of businesses, such as Customer
Relationship Management (CRM) and marketing tools and human resources.
For example - Oracle Business Intelligence System 11i
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4.11
Benefits:
(a)
improve the timeliness and quality of information and enable managers
(b)
(c)
(d)
(e)
(f)
(g)
to better understand the position of their firm in comparison to its
competitors.
have accurate up-to-date information and analyze market position in
terms of changing trends in market share, changes in customer
behavior and spending patterns, customers’ preferences, company
capabilities and market conditions.
develop consistent and “data-based” business decisions and enhance
communication among departments, coordinate activities, and enable
companies to respond more quickly to changes.
be better informed about actions that a company’s competitors are
taking.
help companies share selected strategic information with business
partners, for example, suppliers.
provide managers with information on the state of economic trends or
marketplace factors, and in depth knowledge about the internal
operations of a business.
serve their customers better, for example, analysis of buying trends can
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improve sales forecasting and also optimize inventory levels.
4.12
Limitations – for BIS to work effectively, companies address the need to
have:
(a)
a secure computer system which can specify different levels of user
access to the data, depending on whether the user is a junior staffer,
manager, or executive.
(b)
sufficient data capacity, a plan for data retention.
(c)
benchmark and performance targets set by analysts for the system
(C)
Data warehouse (數據庫)
4.13
DEFINITION
Data warehouse pools the data from separate applications into a large,
common body of information that are collected during the conduct of normal
operations and daily activities of an organization.
From the warehouse, the data can be analysed using reporting and query tools
to produce specific management reports.
4.14
The diagram below illustrates the general flow of data from a source system
through the data warehouse's processing and on to users via dedicated
reporting software.
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4.14
For example, in recording a sale, an accounting information system collects
data about the customer, the product, the timing of the sale, and so on. Sale
transactions that create data that help management make decisions about
production, cash availability, and so on.
4.15
Benefits:
(a)
provide detailed historical information
(b)
be used for extensive querying and reporting without affecting or being
affected by the operational system
(c)
provide smaller data marts for more detailed work on specific sections
of the data warehouse.
(d)
(e)
enhance ability to answer complex questions such as potential return
on investment.
makes an improved data resource available to users and that enable
users to manipulate and use the data in intuitive ways.
4.16
Limitations:
To be useful, the data warehouse should have characteristics that the data are
free of errors, are defined uniformly, are stored in several databases, span a
longer time horizon than the company’s transaction system; and the data
relations are optimized for answering complex question. In this sense,
developers of data warehouse have challenges of:
(a)
(b)
(c)
deciding what data to collect, how to standardize and clean the data to
ensure uniform accuracy and consistency, how to deal with computer
records that typically begin in non-normalized form so as to minimize
redundancies.
determining data standards for data of different forms and varying
frequencies.
ensuring users can access it easily and find answers to complex
questions.
(D)
Data mining (資料開採)
4.17
DEFINITION
Data mining uses the historical information to try to discover hidden
relationships. The data to be mined will normally be in a database. The analyst
may need to select, sample, aggregate filter, cleanse, and transform data in
preparation for mining.
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4.18
When mining is complete, mining results can be exported to the user’s
preferred analysis tools, such as spreadsheets or user-orientated databases.
Data mining software programs will contain various features to extract data
from databases and support the following outputs:
(a)
Creation of classification and prediction models; for example, use
trend analysis to determine the level of variables in the future.
(b)
Patterns in this situation are normally hidden until the data mining tool
identifies the relationships and reports these back to the user.
(c)
Segmentation of databases into groups of related records; for example,
geographical area or type of customer.
(d)
Discovery of similar patterns of behaviour within special time
sequences; for example, determine how purchasing patterns change
over different time frames.
(簡單來說 Data Mining 就是在龐大的數據庫中尋找出有價值的隱藏事
件，籍由統計及人工智能的科學技術，將資料做深入分析，找出其中的知
識，幷根據企業的問題建立不同的模型，以提供企業進行决策時的參考依
據。舉例來說，銀行和信用卡公司可籍由 Data Mining 的技術將龐大的顧
客資料做篩選、分析、推演及預測，找出哪些是最有貢獻的顧客，哪些是
高流失率族群，或是預測一個新的産品或促銷活動可能帶來的響應率，能
够在適當的時間提供適當適合的産品及服務。也就是說，透過 Data Mining
企業可以瞭解它的顧客，掌握他們的喜好，滿足他們的需要。)
4.19
Benefits:
(a)
Sorting and filtering through large amounts of business data in order to
answer questions of interest.
(b)
Better understanding their customers and what they want or need; for
example, identify demand for different products in a supermarket
based on past purchasing history using trend analysis.
(c)
Discovering the relationships and presenting them in an understandable
way so that the relationship may provide the basis for decision making.
(d)
Discovering knowledge in databases that the user may not know
(e)
(f)
exists – presentation of data that shows relationships that were not
previously recognized.
Undertaking further analysis on one segment of the database.
Identify similar patterns of behaviour within special time sequences. In
a supermarket, this analysis can be by day, week or year, for example,
to try to determine how purchasing patterns change over different time
frames.
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(E)
Online analytical processing (在線分析)
4.20
DEFINITION
OLAP is an approach to quickly provide answers to analytical queries that are
multidimensional in nature. OLAP is part of the broader category business
intelligence that includes relational reporting and data mining.
(Details refer to
http://office.microsoft.com/zh-tw/excel/HP101774371028.aspx)
4.21
4.22
The typical applications of OLAP are in business reporting for sales,
marketing, management reporting, business process management, budgeting
and forecasting, financial reporting and similar areas.
The tools that are generally available include:
(a)
Query and reporting tools
These tools are used to general simple queries from the data in the
warehouse. For example, reports such as sales for the past five years by
product line, or details of regions with sales above budget in the last
year, could be generated using this tool.
(b)
Intelligent agents
The intelligent agents can be used to generate rules for the extraction
(c)
4.23
of data from the database. In more advanced situations, the agents will
be used to forecast the results of this analysis into the future, which is
more of a data mining activity than a pure data warehouse search.
Multidimensional analysis
These tools allow multidimensional information to be viewed from
various different perspectives. Using the tool, sales for a particular year
could be analysed by product, or re-arranged to show an analysis by
sales region or store.
Benefits:
(a)
To perform own database analyses, including data-mining.
(b)
(c)
(d)
To conduct multidimensional analysis, for example, time, customer,
product or geographical region.
To examine data at increasing levels of detail or in several layers and
can provide the reasons behind what has happened; for example, take
sales for a quarter shown by geographical region and drill down to see
sales for each region; drill down sales from a product line to a specific
product and then to a specific product size or color.
To create pivot tables of two-dimensional, for example, by product and
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by region.
(e)
To create statistical summaries of database information (for example,
total sales, maximum sales, average sales, etc.) as well as to change an
overall selection category (for example, change the period in which to
view sales data).
(F)
Artificial intelligence (人工智能)
4.24
DEFINITION
AI is the activity of providing such machines as computers with the ability to
display behavior that would be regarded as intelligent if it were observed in
humans.
4.25
This involves:
(a)
Knowledge-based systems
(b)
Neural network
(c)
Perceptive systems
(d)
Learning
(e)
Robotics
(f)
AI hardware
(g)
4.26
Natural language processing
Benefits:
(a)
Preserve knowledge – AI may be able to preserve the knowledge of
human workers which has been lost when the employee has left the
company. AI can retain knowledge in the organization even when the
individual has left.
(b)
Minimization of routine work – AI may be able to replace human
workers, especially in routine work, and perform those tasks more
quickly, with a reduced error rate.
(c)
Enhance value of data – AI may be used to codify or add to existing
(d)
(e)
knowledge bases such as manuals, providing real examples of the
procedures being explained. This manual enhances its value compared
to a manual with no additional information.
Analysing complex problems – AI assist human decisions by providing
an overview of the problem, or identify critical areas, to help human
experts decide how best to address the issue.
Providing a rational view – Many decisions taken by humans may be
affected by emotions or feelings that may limit the usefulness of the
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human-based decision. However, the analysis provided by AI will be
4.27
on a rational basis, unbiased and will not be affected by emotions.
Examples:
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