This document is the first chapter of a textbook on management information systems. It discusses how information systems have become crucial for businesses due to factors like globalization, the rise of knowledge economies, and the emergence of the digital firm and e-commerce. It defines what an information system is, explains the roles of data and information, and how information systems support major business functions. It also covers management challenges in developing effective information systems and how systems must account for both technical and behavioral aspects of organizations.

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1
MANAGING THE
DIGITAL FIRM
Chapter

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• What is the role of information systems in
today’s competitive business environment?
• What exactly is an information system?
What do managers need to know about
information systems?
• How are information systems transforming
organizations and management?
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
OBJECTIVES

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• How has the Internet and Internet technology
transformed business?
• What are the major management challenges
to building and using information systems?
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
OBJECTIVES

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1. Design competitive and effective systems
2. Understand system requirements of
global business environment
3. Create information architecture that
supports organization’s goal
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
MANAGEMENT CHALLENGES

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4. Determine business value of information
systems
5. Design systems people can control,
understand and use in a socially, ethically
responsible manner
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
MANAGEMENT CHALLENGES

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
The Competitive Business Environment and the Emerging Digital Firm
WHY INFORMATION SYSTEMS?
Four powerful worldwide changes that
have altered the business environment:
1. Emergence of the Global Economy
2. Transformation of Industrial Economies
3. Transformation of the Business Enterprise
4. The Emerging Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Emergence of the Global Economy
• Management and control in a global
marketplace
• Competition in world markets
• Global work groups
• Global delivery systems
The Competitive Business Environment and the Emerging Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Transformation of Industrial Economies
• Knowledge- and information-based
economies
• Productivity
• New products and services
• Knowledge: a central productive and
strategic asset
The Competitive Business Environment and the Emerging Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Transformation of Industrial Economies
• Time-based competition
• Shorter product life
• Turbulent environment
• Limited employee knowledge base
The Competitive Business Environment and the Emerging Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-1
Labor Force Composition 1900-1997
WHY INFORMATION SYSTEMS?

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Transformation of the Business Enterprise
• Flattening
• Decentralization
• Flexibility
• Location independence
• Low transaction and coordination costs
• Empowerment
• Collaborative work and teamwork
The Competitive Business Environment and the Emerging Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
WHY INFORMATION SYSTEMS?
Emergence of the Digital Firm
• Digitally-enabled relationships with
customers, suppliers, and employees
• Core business processes accomplished
via digital networks
• Digital management of key corporate
assets
• Rapid sensing and responding to
environmental changes
The Competitive Business Environment and the Emerging Digital Firm

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A set of interrelated components that collect
(or retrieve), process, store, and distribute
information to support decision making and
control in an organization
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
What Is an Information System?
WHY INFORMATION SYSTEMS?

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• Data: Streams of raw facts representing
events such as business transactions
• Information: Clusters of facts that are
meaningful and useful to human beings in
the processes such as making decisions
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
What Is an Information System?
WHY INFORMATION SYSTEMS?

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-2
Data and Information
WHY INFORMATION SYSTEMS?
What Is an Information System?

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INPUT OUTPUT
PROCESS
FEEDBACK
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Activities in an Information System
WHY INFORMATION SYSTEMS?

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Functions of an Information System
WHY INFORMATION SYSTEMS?
Figure 1-3

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• Rely on computer hardware and
software
• Processing and disseminating
information
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Computer-Based Information System (CBIS)
WHY INFORMATION SYSTEMS?

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• Fixed definitions of data, procedures
• Collecting, storing, processing,
disseminating, using data
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Formal Systems
WHY INFORMATION SYSTEMS?

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• An organizational and management
solution
• Based on information technology
• To a challenge posed by the
environment
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
A Business Perspective on Information Systems
WHY INFORMATION SYSTEMS?

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Information Systems
ORGANIZATIONS TECHNOLOGY
MANAGEMENT
INFORMATION
SYSTEMS
Figure 1-4
WHY INFORMATION SYSTEMS?

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• Information systems literacy: Broad-
based understanding of information systems
that includes behavioral knowledge about
organizations and individuals using
information systems as well as technical
knowledge about computers.
• Computer literacy: Knowledge about
information technology, focusing on under-
standing how computer-based technologies
work
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
A Business Perspective on Information Systems
WHY INFORMATION SYSTEMS?

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• Sales and marketing
• Manufacturing
• Finance
• Accounting
• Human resources
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Major Business Functions
WHY INFORMATION SYSTEMS?

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Key Elements:
• People: Managers, knowledge workers,
data workers, production or service
workers
• Structure: Organization chart , groups of
specialists, products, geography
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Organizations
WHY INFORMATION SYSTEMS?

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• Operating procedures: Standard operating
procedures (SOP, rules for action)
• Politics: Power to persuade, get things done
• Culture: Customs of behavior
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Organizations
WHY INFORMATION SYSTEMS?

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Levels:
• Senior managers: make long-range
strategic decisions about products and
services
• Middle managers: Carry out the programs
and plans of senior management
• Operational managers: monitor the firm’s
daily activities
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Management
WHY INFORMATION SYSTEMS?

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Tools managers use to cope with change
• Hardware: Physical equipment
• Software: Detailed preprogrammed
instructions
• Storage: Physical media for
storing data and the software
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Computer Technology
WHY INFORMATION SYSTEMS?

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• Communications Technology:
transfers data from one physical location
to another
• Networks: link computers to share data
or resources
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Computer Technology
WHY INFORMATION SYSTEMS?

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
SOCIOLOGY
POLITICAL
SCIENCE
PSYCHOLOGY
COMPUTER
SCIENCE
OPERATIONS
RESEARCH
MANAGEMENT
SCIENCE
TECHNICAL APPROACHES
MIS
BEHAVIORAL APPROACHES
Figure 1-5

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Optimize systems performance:
• Technology and organization
• Organizations mutually adjust to one
another until fit is satisfactory
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Socio-Technical Systems
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
SOURCE: Liker, et al, 1987
Figure 1-6
Socio-technical Systems
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
The Interdependence Between Organizations and Information Systems
Figure 1-7

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• 1950s: Technical changes
• 60s-70s: Managerial controls
• 80s-90s: Institutional core activities
Growing Importance
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
THE NETWORK REVOLUTION AND THE INTERNET
The Widening Scope of Information Systems

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-8
THE NETWORK REVOLUTION AND THE INTERNET
The Widening Scope of Information Systems

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• Communicate and collaborate
• Access information
• Participate in discussions
• Supply information
• Find entertainment
• Exchange business transactions
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
What You Can Do on the Internet

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• Flattening organizations
• Separating work from location
• Reorganizing work-flows
• Increasing flexibility
• Redefining organizational boundaries
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
New Options for Organizational Design

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-9
TOWARD THE DIGITAL FIRM
Flattening Organizations Information Systems

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-10
Redesigned Work Flow For Insurance Underwriting
TOWARD THE DIGITAL FIRM

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• Electronic commerce
• Electronic business
• Electronic market: Information systems
links, buyers and sellers to exchange
information, products, services, payments
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
The Digital Firm

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Figure 1-11
TOWARD THE DIGITAL FIRM

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• Internet links buyers, sellers
• Lower transaction costs
• Goods and services advertised, bought,
exchanged worldwide
• Business-to-business transactions
increasing
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
TOWARD THE DIGITAL FIRM
Electronic Commerce

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• Internet: Business builds private, secure
network
• E-mail, Web documents, group
software: Extends effective
communication and control
• Extranet: Extension of intranet to
authorized external users
Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Electronic Business
TOWARD THE DIGITAL FIRM

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Essentials of Management Information Systems
Chapter 1 Managing the Digital Firm
Information Architecture and Information Technology Infrastructure
TOWARD THE DIGITAL FIRM
Figure 1-12

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1
MANAGING THE
DIGITAL FIRM
Chapter