2/5/2025

Management Information Systems: Managing

Learning Objectives
the Digital Firm
Sixteenth Edition

1. Describe the characteristics of digital age and valuable information.

2. Define an information system and present its components.

Chapter 1
3. Describe how information systems are transforming business
Information 4. Understand the benefits of information systems to firms
Systems in Global
5. Explain the different types of information systems
Business Today

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Characteristics of Digital Age Information Concepts

• DATA: Raw facts with no precise context or meaning
 Transition from Industrial to Information Society
• INFORMATION: refined, organized, meaningful, and useful data.
 Explosion of data: 90% of data has been created in the last 2 years To become an information, data is processed by summing,
 Information is the primary driver of the economy: firms integrate ordering, averaging, grouping, comparing, etc.

digital technologies into their operations, processes, and customer • KNOWLEDGE: A contextual information based on expert insight

interactions and experience-based intuition. It originates in the minds of

people and their ability to compare situations, problems, and
 Internet and technology innovations: Cloud, Big Data, IoT, AI, VR,
solutions. It allows predictions, unlike information which simply
Quantum Computers, Blockchain, etc.
gives us the facts.

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Figure 1.3 Data and Information

Types of Data

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The Characteristics of Valuable Information Characteristics of Valuable Information

• Relevant: directly related to the subject, addresses specific questions.

• Complete: provides all the necessary details and context. • If an organization’s information is not accurate or
complete: People can make poor decisions, costing
• Accurate: error free, provides a true representation of the facts or reality.
thousands, or even millions, of dollars
• Timely: up-to-date, delivered when needed.
• Depending on the type of data you need: Some
• Reliable: can be trusted, obtained from credible sources.
characteristics become more important than others
• Accessible: we can retrieve it easily and in the right format when needed
• Valuable information: – Can help people and their
• Useful: practical and serves a purpose (decision-making, problem-solving)
organizations perform tasks more efficiently and effectively

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What Is an Information System? Activities of an Information System

Components that work together to process data and produce

information.

Collects, stores, and disseminates information.

Transform raw data into useful Information through three

basic activities: Input, Processing and Output •Input: captures or collects raw data
•Processing: converting raw input into a meaningful form
•Output: transfers the processed information to people or activities that
use it.
• Feedback: Output is returned to appropriate users to help evaluate or
correct input stage.
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The components of an Information The components of an IS

System • Hardware: computer equipment used to manage information

• Software: computer programs that govern the hardware

• Database: with a database, the collected data is stored and

organized. Examples of databases include employee records and
product catalogues.

• Telecommunications, networks, and the Internet

• People: The most important element in an IS

• Procedures: strategies, policies, methods, and rules for using the

IS
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How are IS transforming business ? Why firms invest in Information systems ?

– New businesses and industries appear, old ones decline • Firms investing in IS to achieve the following benefits:

1. Automating Repetitive Tasks

– Sources of business value are shifting from products to solutions
2. Creating New Business Models
– Firms are increasingly using social media
3. Improving Customer Satisfaction
– Firms are increasingly using online platforms and applications.
4. Improving Internal Communication
– Firms are evolving into digital firms 5. Improving Decision Making
6. Optimizing workflows

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1. Automating Repetitive Tasks 2. Creating New Business Models

• IS reduce the need for human intervention in repetitive or • IS enable the creation of entirely new business models.

routine tasks, which decreases errors, minimizes waste, • The shift from the “brick and mortar” model to the online marketplace

speeds up processes, and frees up time for higher-value model (Uber, Lyft…) or to the online retailer model (Alibaba, Amazon).

activities. • The shift from the purchase model to the transaction/rental model. New
business models include Netflix, Airbnb, Cloud computing, Car-as-a-
• Example: using an ERP system to automate administrative
Service (CaaS) platforms.
tasks like data entry, invoicing, ordering, inventory
• CaaS: Users can utilize an app on their smartphone, input their location
management, etc.
and their destination, then an autonomous vehicle will arrive to transport
them.

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3. Increasing Customer Satisfaction 4. Improving Internal Communication

• Mobile apps enhance the shopping experience: customers can tailor
product displays, check reviews and FAQs, pay online, initiate returns or
• Communication tools (such as intranets, collaborative
modify purchases, track delivery status, have real-time inventory visibility.
Zara uses Virtual fitting rooms and AR-powered shopping platforms to platforms, or messaging tools) facilitate real time
allow customers to try on clothing virtually. communication between different departments regardless

• Chatbots analyze customer behavior and preferences to suggest tailored of geographical location, thereby improving coordination.
products, offer 24/7 assistance (answering questions, resolving issues).
• Example: Firms use Microsoft Teams to centralize project-
• CRM systems store important customer data (contact details, purchase related communication. Real-time updates, notifications
history, communication records…) to enable personalized offers via email,
and alerts can be sent, ensuring teams are always
SMS, or apps.
informed.
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5. Improving Decision Making 6. Optimizing Workflows

• IS provides accurate, up-to-date information to make the • Many IS track and monitor production activities in real-time to ensure

correct choice. optimal workflow.

• Firms use ERP systems to predict and avoid bottlenecks by optimizing

• Interactive dashboards allow decision-makers to view live
machine utilization and workforce allocation. ERP systems automate
data, such as sales performance or customer feedback.
inventory replenishment when stock drops below a threshold.

• Machine learning algorithms predict future outcomes based • Firms use IoT sensors to track machinery health, and schedule
on historical and real-time data. Managers can use IS to run maintenance to prevent downtime.

different scenarios to determine which alternative gives the • Amazon's use GPS and route optimization software to track drivers in real
most beneficial result. time and suggests the fastest delivery routes.

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Types of Information Systems 1. Transaction Processing Systems (TPS)

• Purpose: Automate and record routine business transactions.
• IS come in various types, each designed to serve specific organizational
• Key Features:
needs. Here's an overview:
– Process large volumes of repetitive tasks.
1. Transaction Processing Systems (TPS)
– Ensure accuracy and speed.
2. Decision Support Systems (DSS)
3. Enterprise Resource Planning (ERP) Systems – Examples: ATM, ordeing, billing, payroll, inventory…

4. Customer Relationship Management (CRM) Systems • Example: A POS (point of sale) system records transactions and updates
5. Knowledge Management Systems (KMS) inventory in real-time.

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2. Decision Support Systems (DSS) 3. Enterprise Resource Planning (ERP)

Systems
• Purpose: Assist managers in complex decision-making by • Purpose: Integrate core business processes like procurement,
analyzing large datasets. inventory, production planning and sales into a unified system.
• Key Features: • Key Features:
– Includes tools for simulations, what-if analysis, and – Centralized database for functions like finance, HR, and
modeling. manufacturing.
• Example Use Case: A DSS helps a logistics manager – Real-time information sharing across departments.
optimize delivery routes based on cost and time.
• Example: An ERP system consolidates data from production
and sales to forecast demand
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4. Customer Relationship Management 5. Knowledge Management Systems

(CRM) Systems (KMS)
• Purpose: Manage interactions with customers. • Purpose: Facilitate the creation, sharing, and management
of organizational knowledge.
• Key Features:

– Tracks customer data (purchase history, preferences, etc.) • Key Features:

– Automates marketing, sales, and customer service tasks. – Supports collaboration and document sharing.

– Captures best practices and lessons learned.

• Example: A CRM system helps a sales team track potential
customers and manage follow-ups effectively. • Example: A consulting firm uses a KMS to store case studies
and internal expertise.

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