This document discusses the evolution of information technology in organizations from early operational uses to modern strategic applications. It outlines the progression from transaction processing systems to modern knowledge management tools and integrated enterprise systems. The document also examines frameworks for control and performance measurement like the balanced scorecard and discusses approaches to knowledge management.

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Chapter Eight
Information Technology and
Control

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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
Information
System
Evolution
MANAGEMENT
LEVEL
TOP
(strategy, plans,
non-programmed)
FIRST-LINE
(operational, past,
programmed)

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A Simplified Feedback Control
Model
Set Strategic
Goals
Measure Actual
Performance and
Compare to
Standards
Take Corrective
Action
as Needed
Establish Standards
of Performance

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Major Perspectives of the
Balanced Scorecard
Mission
Strategy
Goals
Internal Business Processes
Does the chain of internal activities and
processes add value for customers and
shareholders?
Examples of measures: order-rate
fulfillment, cost-per-order
Financial
Do actions contribute to improving
financial performance?
Examples of measures: profits,
return on investment
Learning and Growth
Are 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, “Using
The 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; and
Cathy Lazere, “All Together Now,” CFO, February 1998, 28-36.

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Example of ERP Network
Central
Database
Financial and
AccountingSales
Distribution
Purchasing
Inventory and
Manufacturing
Human
Resources

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Two Approaches to
Knowledge Management
Explicit
Provide high-quality, reliable, and fast
information systems for access of
codified, reusable knowledge
Tacit
Channel individual expertise
to provide creative advice
on strategic problems
Knowledge
Management
Strategy
People-to-documents
Develop an electronic
document system that
codifies, stores,
disseminates, and allows
reuse of knowledge
Invest heavily in information
technology, with a goal of
connecting people with
Reusable, codified knowledge
Person-to-person
Develop networks for
linking people so that
tacit knowledge can
be shared
Invest moderately in
information technology,
with a goal of facilitating
conversations 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 Business
Review, March-April 1999, 106-116.

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Electronic Data Interchange for
International Transactions
Export Freight
Forwarder
Manufacturer’s
Bank’
Export
Customs
Import
Customs
Import
Clearing Agent
CustomerMANUFACTURER
Customer’s
Bank
Suppliers

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Key Characteristics of Traditional vs.
Emerging Interorganizational
Relationships
Traditional Interorganizational
Relationships
Emerging Interorganizational
Relationships
Suppliers
Customers
Arm’s-length relationship
Use of telephone, mail, some
EDI for ordering, invoicing,
payments
Direct access to manufacturer,
real-time information exchange
Electronic access to product
information, consumer ratings,
customer service data
Limited communication with
manufacturer
Mix of phone response, mail
hard 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.