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Managing the Digital Firm, Seventh Canadian Edition
CHAPTER 1
Information Systems in
Business Today
LEARNING OBJECTIVES
After reading this chapter, you will be able to answer the following questions:
1. How are information systems transforming business, and what is their relationship to
globalization?
2. Why are information systems so essential for running and managing a business today?
3. What exactly is an information system? How does it work? What are its management,
organization, and technology components?
Teaching Suggestions
You are probably meeting in the first class session to introduce yourself, the course, and
to meet the students. After going over any requirements you may have for the course, try
to give an overview of the course.
The opening case, “The Canadian Wheat Board: A Little More Than Numbers” illustrates
the challenges and benefits of implementing information systems. The case shows why
information systems are so essential today. The CWB is a business as well as a
cooperative, and farmers need to have their products priced appropriately in order to stay
in business. The chapter-opening diagram calls attention to important points raised by
this case and this chapter.
To price properly and quickly, the Board chose to modernize their pricing software and
rely on more advanced in-house information technology to provide its pricing models.
The new system had to integrate with Excel and be available on desktop computers, and
it had to be easy to learn. This was only one part of the advances in information
Managing the Digital Firm, Seventh Canadian Edition
technology and information systems that the CWB chose to make. They completely
You should discuss the advantages of the system and why it was important to have the
system integrated with Excel. What are some reasons why the system could be developed
and implemented so quickly? What are some future concerns around acceptance of the
system and continued use of the system?
Section 1.1, “The Role of Information Systems in Business Today,”
gives students a feel for the importance of information systems in business today and how
they have transformed businesses on the world stage. A good discussion of the six
important business objectives outlined in this section allows the instructor and students to
discuss why businesses have become so dependent on information systems today and the
importance of these systems for the survival of a firm. Stress to students that information
systems are not a luxury. In most businesses they are the core to survival. This would be
a good time to ask students to discuss how their own schools are using information
systems to enhance their product offering.
Table 1-1 is a great way to introduce students to much of the new IT jargon that has
developed over the last several years. Most of the technologies will be discussed in future
chapters. Ask students how much hands-on experience they’ve had with some of the new
business tools as either an employee or a customer.
Globalization is affecting virtually every country in the world. The most striking
evidence of this trend is the increasing presence of cell phones in the very small villages
of Africa. As technology becomes more pervasive and, in some cases easier to use,
Ask students to provide examples of truly digital firms (Cisco Systems and Dell Computers)
as opposed to those businesses (local mom-and-pop stores or a local doctor’s office) that
still perform many business processes outside of integrated information systems.
Review the six strategic business objectives: operational excellence; new products,
services, and business models; customer and supplier intimacy; improved decision
Managing the Digital Firm, Seventh Canadian Edition
WINDOW ON MANAGEMENT: RUNNING THE BUSINESS FROM
THE PALM OF YOUR HAND
Case Study Questions
1. What kinds of applications are described here? What business functions do they
support? How do they improve operational efficiency and decision making?
Email, messaging, social networking, and salesforce management are described in
2. Identify the problems that businesses in this case study solved by using mobile
digital devices.
Jackson Kayak’s CEO, Eric Jackson monitors industry trends in the field and meets
directly with dealers and customers to maintain a strong customer focus. He uses an
iPhone and iPad to run his entire 120-person company from afar. His iPad gives him
3. What kinds of businesses are most likely to benefit from equipping their
employees with mobile digital devices such as iPhones, iPads, and BlackBerrys?
Any business with a need to communicate with customers, suppliers, and business
colleagues can benefit from equipping employees with mobile digital devices.
4. One company deploying iPhones has said, “The iPhone is not a game changer,
it’s an industry changer. It changes the way that you can interact with your
customers and with your suppliers.” Discuss the implications of this statement.
First and foremost, those that effectively and efficiently deploy mobile digital device
technology gain a huge competitive advantage over those who do not use the
Section 1.2, “Perspectives on Information Systems”
gives students the facts and definitions that underpin information systems and allow
students to knowledgeably discuss information systems. Students do not need the
Managing the Digital Firm, Seventh Canadian Edition
knowledge of a technical person, but they do need to understand the role of information
technology and how it must support the organization’s business strategy. They must also
understand how information technology can be used to help transform a business. Note
that the chapter’s definitions and terms help prepare students to discuss information
systems as an intricate part of business systems. Encourage students to see that
technology is subordinate to the organization and its purposes.
WINDOW ON TECHNOLOGY: UPS COMPETES GLOBALLY
WITH INFORMATION TECHNOLOGY
Case Study Questions
1. What are the inputs, processing, and outputs of UPS’s package tracking system?
Inputs: The inputs include package information, customer signature, pickup, delivery,
2. What technologies are used by UPS? How are these technologies related to
UPS’s business strategy?
Technologies include handheld computers (DIADs), barcode-scanning systems, wired
3. What strategic business objectives do UPS's information systems address?
• Operational excellence: UPS has maintained leadership in small-package
delivery services despite stiff competition from FedEx, Canada Post, the U.S.
Postal System by investing heavily in advanced information technology.
4. What would happen if UPS's information systems were not available?
Arguably, UPS might not be able to compete effectively without technology. If the
technology were not available, then UPS would, as it has through most of its history,
Managing the Digital Firm, Seventh Canadian Edition
Section 1.3, “Contemporary Approaches to Information Systems”.
Too often, information systems are thought to be all about hardware and software. Issues
that focus on human behavioural aspects of information systems are overlooked or
Review Summary
1. How are information systems transforming business and what is their
relationship to globalization?
2. Why are information systems so essential for running and managing a business
today?
3. What exactly is an information system? How does it work? What are its
management, organization and technology components?
4. What are complementary assets? Why are complementary assets essential for
ensuring that information systems provide genuine value for an organization?
5. What academic disciplines are used to study information systems? How does
each contribute to an understanding of information systems? What is a
sociotechnical systems perspective?
Key Terms
The following alphabetical list identifies
the key terms discussed in this chapter.
Complementary assets 21
Computer hardware 16
Managing the Digital Firm, Seventh Canadian Edition
Data workers 15
Digital firm, 9
Extranets 17
systems (MIS) 15
Middle management 15
Network 17
Review Questions
1. How are information systems transforming business and what is their
relationship to globalization?
Describe how information systems have changed the way businesses operate and
their products and services.
Wireless communications, including computers and mobile hand-held computing
devices, are keeping managers, employees, customers, suppliers, and business
Identify three major new information system trends.
Three information system trends that are influencing the way businesses interact with
employees, customers, suppliers, and business partners include emerging mobile
Managing the Digital Firm, Seventh Canadian Edition
Describe the characteristics of a digital firm.
• Significant business relationships with customers, suppliers, and employees are
digitally enabled and mediated.
• Core business processes are accomplished through digital networks spanning the
Describe the challenges and opportunities of globalization in a “flattened” world.
Customers no longer need to rely on local businesses for products and services. They
can shop 24/7 for virtually anything and have it delivered to their door or desktop.
2. Why are information systems so essential for running and managing a business
today?
List and describe six reasons why information systems are so important for
business today.
Six reasons why information systems are so important for business today include:
2. New products, services, and business models
4. Improved decision making
6. Survival
Information systems are the foundation for conducting business today. In many
3. What exactly is an information system? How does it work? What are its
management, organization and technology components?
Define an information system and describe the activities it performs.
An information system is a set of interrelated components that work together to
List and describe the organizational, management, and technology dimensions of
information systems.
i. Organization: The organization dimension of information systems involves issues
such as the organization’s hierarchy, functional specialties, business processes,
Distinguish between data and information and between information systems
literacy and computer literacy.
iv. Data are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form
Explain how the Internet and the World Wide Web are related to the other
technology components of information systems.
The Internet and World Wide Web have had a tremendous impact on the role
information systems play in organizations. These two tools are responsible for the
4. What are complementary assets? Why are complementary assets essential for
ensuring that information systems provide genuine value for an organization?
Define complementary assets and describe their relationship to information
technology.
Complementary assets are those assets required to derive value from a primary
investment. Firms must rely on supportive values, structures, and behaviour patterns
Describe the complementary social, managerial, and organizational assets
required to optimize returns from information technology investments.
Table 1-3 lists the complementary social, managerial, and organization assets
required to optimize returns from information technology investments. Here are a few
of them:
Organizational assets:
• Supportive culture that values efficiency and effectiveness
• Appropriate business model
Managerial assets:
• Strong senior management support for technology investment and change
• Incentives for management innovation
• Teamwork and collaborative work environments
Social assets:
5. What academic disciplines are used to study information systems? How does
each contribute to an understanding of information systems? What is a
sociotechnical systems perspective?
List and describe each discipline that contributes to a technical approach to
information systems.
A technical approach to information systems emphasizes mathematically-based models
Managing the Digital Firm, Seventh Canadian Edition
List and describe each discipline that contributes to a behavioural approach to
information systems.
A behavioural approach to information systems focuses on questions such as strategic
business integration, behavioural problems of systems utilization, system design and
Describe the sociotechnical perspective on information systems.
A sociotechnical perspective combines the technical approach and behaviour
Discussion Questions
1. Information systems are too important to be left to computer specialists. Do you
agree? Why or why not?
Although student answers will vary, this is a good place to reiterate that information
systems are more than just technology. Information systems development and usage
involves organization, management, and technology dimensions. It is important to
2. If you were setting up an extranet for the Canadian Wheat Board, what
management, organization, and technology issues might you encounter?
Management: Typical problems include:
i. Lack of employee training
Managing the Digital Firm, Seventh Canadian Edition
Organization: Typical problems include:
vii. Outdated/poor business processes (usually inherited from the past)
viii. Unsupportive culture and attitudes
Technology: Typical problems include:
xiv. Insufficient or aging hardware
xv. Outdated software
3. What are some of the organizational, managerial, and social complementary
assets that help make UPS's information systems so successful?
Table 1-3 provides a list of complementary social, managerial, and organizational
assets required to optimize returns from information technology investments.
Organizational assets:
• Supportive organizational culture that values efficiency and effectiveness
• Appropriate business model
Managerial assets:
• Strong senior management support for technology investment and change
• Incentives for management innovation
Managing the Digital Firm, Seventh Canadian Edition
Social assets:
• The Internet and telecommunications infrastructure
Hands-On MIS Projects
This section gives students an opportunity to analyze real world information systems
needs and requirements. It provides several exercises you can use to determine if students
are grasping the material in the chapter.
Management Decision Problems
1. Snyder’s of Hanover: The financial department uses spreadsheets and manual
processes for much of its data gathering and reporting. Assess the impact of this
situation on business performance and management decision making.
• Data entry errors from repetitive entry
2. Dollar General Corporation: Wants to keep costs as low as possible so it does not
use an automated method for keeping track of inventory at each store. The Dollar
Store operates deep discount stores in Canada offering housewares, cleaning supplies,
clothing, health and beauty aids, and packaged food, with many items selling for $1.
Its business model calls for keeping costs as low as possible. Although the company
• Determine business problems – mismanagement of inventory, too little or too
much inventory, no ability to track inventory.
Managing the Digital Firm, Seventh Canadian Edition
Improving Decision Making: Using Databases to Analyze Sales Trends:
Software skills: Database querying and reporting
Business skills: Sales Trend Analysis
This exercise helps students understand how they can use database software to produce
valuable information from raw data. The solutions can be created using the query wizard
and report wizard capabilities of Microsoft Access. Students can, of course, create more
• Which products should be restocked?
• Which stores and sales regions would benefit from a promotional campaign and
additional marketing?
• When (what time of year) should products be offered at full price, and when should
discounts be used?
Improving Decision Making: Using the Internet to Locate Jobs Requiring
Information Systems Knowledge
Software skills: Internet-based software
Business skills: Job searching
CASE STUDY: ARE ELECTRONIC MEDICAL RECORDS A CURE
FOR HEALTH CARE?
1. Identify and describe the problem in this case.
The majority of medical records are currently paper-based, making these records very
2. What management, organization, and technology factors are responsible for the
difficulties in building electronic medical record systems? Explain your answer.
Management: Physicians, hospitals, and insurers must meet federal mandates for
implementing electronic medical records or suffer penalties. Only a small amount of
Managing the Digital Firm, Seventh Canadian Edition
3. What is the business, political, and social impact of not digitizing medical
records (for individual physicians, hospitals, insurers, patients, and provincial
governments)?
Individual physicians: In the U.S, the federal government plans to assess penalties
on practices that fail to comply with the new electronic recordkeeping standards.
4. What are business and social benefits of digitizing medical recordkeeping?
Business benefits: An electronic medical record system contains all of a person’s
vital medical data, including personal information, a full medical history, test results,
diagnoses, treatments, prescription medications, and the effect of those treatments. A
5. Are electronic medical record systems a good solution to the problem of rising
health care costs in the United States? Explain your answer.
If done correctly, EMR systems can help control rising health care costs. However,
