Managing the Digital Firm, Seventh Canadian Edition
CHAPTER 13
Developing Information Systems
LEARNING OBJECTIVES
After reading this chapter, you will be able to answer the following questions:
1. How does developing new information systems produce organizational change?
2. What are the core activities in the information systems development process?
3. What are the principal methodologies for modelling and designing systems?
4. What are the alternative methods for building information systems?
5. What are new approaches for systems development in the digital firm era?
Teaching Suggestions
The opening case, “New Systems and Business Processes Put MoneyGram ‘On the
Money,’” highlights the importance of an organization continually assessing its business
processes and striving to improve them. The company’s old system relied on outdated
systems that used spreadsheets and manual processes that were too time-consuming and
error-prone. More importantly, there was no way for managers to glean data from the
system to help them make better decisions.
Probably the most important thing MoneyGram executives did was to make users part of
the solution by involving them in the design and redesign from the beginning. Top
Managing the Digital Firm, Seventh Canadian Edition
Section 13.1, “Systems as Planned Organizational Change”
This section discusses different ways to manage organizational change. It begins with
Figure 13-1 that illustrates four common forms of organizational change and the
risk/reward of each one. From simple automation to the more drastic paradigm shift, each
one requires careful management of the effects these changes have on people. Business
process redesign (BPR) has taken on a negative reputation over the years, mostly because
“Section 13.2, Overview of Systems Development”
This section breaks down the systems development process into six separate activities:
system analysis, system design, programming, testing, conversion, and production and
maintenance. Specific information requirements must be established at the beginning of
the system analysis phase. Otherwise, you may be building a system that doesn’t solve an
organization’s problem. Faulty requirements analysis is a leading cause of systems failure
and high systems development costs. Another major cause of system failure is attributed
to insufficient user involvement in the design effort. Too many times system analysis and
design are left up to the IT staff instead of involving users throughout the system
development process. What’s most important to remember is that the changes introduced
into the organization will be the most problematic to manage. People don’t like change
and will sometimes do what they can to prevent it.
Managing the Digital Firm, Seventh Canadian Edition
WINDOW ON ORGANIZATIONS: BURTON SNOWBOARDS
SPEEDS AHEAD WITH NIMBLE BUSINESS PROCESSES
Case Study Questions
1. Analyze Burton using the value chain and competitive forces models.
Burton uses the traditional competitor’s tactics of continuously devising new, more
efficient ways to produce new products and attracting new customers by further
2. Why are the business processes described in this case such an important source
of competitive advantage for Burton?
By decreasing the time involved with the available-to-promise process, dealers and
customers now have more precise information about the availability of products
within 20 minutes. The inefficiencies in reporting inventory costs money and time.
3. Explain exactly how these process improvements enhance Burton’s operational
performance and decision making.
Burton wanted to speed up the available-to-promise process so that dealers and retail
customers would have more precise information about the company’s availability of
products not currently in stock. The process now takes 20 minutes.
Managing the Digital Firm, Seventh Canadian Edition
Section 13.3, “Alternative Systems–Building Approaches”
The traditional systems lifecycle methodology is usually only used for very large,
complex systems. The SDLC is the oldest method for building information systems. It is
inflexible and does not easily allow changes at any step along the way. However, it can
be effective for highly structured systems such as accounting, payroll or complex
End-user development is a hot area. You may want to note that the original attraction of
using spreadsheets on personal computers were attempts by end users to provide their
Section 13.4, “Application Development for the Digital Firm”
Businesses today are often required to build e-commerce and e-business applications very
rapidly to remain competitive. New systems are likely to have more interorganizational
requirements and processes than in the past. Companies are turning to rapid application
design, joint application design (JAD), and agile development to improve the systems
development process. Rapid application development (RAD) uses object-oriented
software, visual programming, prototyping, and fourth-generation tools for very rapid
Managing the Digital Firm, Seventh Canadian Edition
WINDOW ON TECHNOLOGY: WHAT DOES IT TAKE TO GO
MOBILE?
Case Study Questions
1. What management, organization, and technology issues need to be addressed
when building mobile applications?
Management: You can’t just port a Web site or desktop application to a smartphone
or tablet. It’s a different systems development process. Managers need to understand
Organization: A mobile strategy involves more than selecting mobile devices,
operating systems, and applications. It also involves changes to business processes,
changing the way people work and the way a firm interacts with its customers.
Technology: Developing mobile apps or a mobile Web site has some special
challenges. The user experience on a mobile device is fundamentally different from
2. How does user requirement definition for mobile applications differ from that in
traditional systems analysis?
Deckers Outdoor Corporation, the parent company of brands such as UGG Australia,
Teva, and Simple Shoes, compiled significant research about customer behaviour on
mobile devices. It wanted to know how customers used mobile devices to research
3. How do you think using a mobile app will affect the real estate industry in
Canada?
Mobile apps can help the real estate agent and real estate buyers. It can use
Review Summary
1. How does developing new systems produce organizational change?
2. What are the core activities in the systems development process?
3. What are the principal methodologies for modelling and designing systems?
4. What are the alternative methods for building information systems?
5. What are new approaches for systems development in the digital firm era?
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
Acceptance testing 412
Agile development 423
Automation 403
Iterative 419
Joint application design (JAD) 423
Maintenance 413
Managing the Digital Firm, Seventh Canadian Edition
Rapid application development
(RAD) 423
Rationalization of procedures 403
Systems design 410
Systems development 4408
Systems life cycle 5418
Review Questions
1. How does developing new systems produce organizational change?
Describe each of the four kinds of organizational change that can be promoted
with information technology.
Figure 13-1 shows four kinds of organizational change and the risks and rewards
of each:
• Automation: Low risk, low reward. Employees perform tasks more efficiently
and effectively.
• Rationalization: Medium risk, medium reward. Involves streamlining standard
operating procedures, redesigning business processes, workflows, and user
interfaces.
• Business process redesign: Higher risk, higher reward. Organizations rethink and
Define business process management and describe the steps required to carry it
out.
Business process management: Companies manage incremental process changes
that are required simultaneously in many areas. Organizations need to revise and
Steps required for effective BPM:
• Identify processes for change: A business first needs to understand what
business processes need improvement. Improving the wrong processes simply
allows a business to continue doing what it shouldn’t do in the first place.
Managing the Digital Firm, Seventh Canadian Edition
• Analyze existing processes: An organization must understand and measure the
performance of existing processes as a baseline including inputs, outputs,
resources, and the sequence of activities. The process design team identifies
redundant steps, paper-intensive tasks, bottlenecks, and other inefficiencies.
Otherwise, the effectiveness of the changes can’t be determined.
Explain how information systems support process changes that promote quality
in an organization.
Total quality management (TQM) and Six Sigma are two quality improvement
programs that differ from business process redesign that is based on radical one-time
redesigns of business processes. They are more incremental in their approach to
change than BPR. TQM requires a series of continuous improvements. Six Sigma
requires statistical analysis to detect flaws and make minor adjustments.
Information systems help achieve organizational goals in these two programs by
• helping companies simplify products or processes
2. What are the core activities in the systems development process?
Distinguish between systems analysis and systems design. Describe the activities
for each.
System analysis: Requires an organization to analyze problems it will try to solve
with information systems. It includes defining a problem, identifying its causes,
Managing the Digital Firm, Seventh Canadian Edition
System design: Shows how the system will fulfill the objective of the system
analysis. It’s the overall plan or model for the system that serves as a blueprint and
Define information requirements, and explain why they are difficult to
determine correctly.
Information requirements involve identifying who needs what information, where,
when, and how. They define the objectives of the new or modified system and contain
a detailed description of the functions the new system must perform. Gathering
Explain why the testing stage of systems development is so important. Name and
describe the three stages of testing for an information system.
Testing is critical to the success of a system because it is the only way to ascertain
whether the system will produce the right results. Three stages of information system
testing are:
Describe the role of programming, conversion, production, and maintenance in
systems development.
• Programming: Specifications that were prepared during the design stage are
translated into software program code.
• Conversion: The process of changing from the old system to the new system.
• Production: The operation of the system once it has been installed and
3. What are the principal methodologies for modelling and designing systems?
Compare object-oriented and traditional structured approaches for modelling
and designing systems.
Structured methods for designing systems separate processes from data in the
modelling process. System analysis is separated from system design. Object-oriented
development (OOD) combines processes and data into an object that becomes the
4. What are the alternative methods for building information systems?
Define the traditional systems lifecycle. Describe each of its steps and its
advantages and disadvantages for systems building.
The traditional systems lifecycle is a formal methodology for managing the
development of systems and is still the principal methodology for large projects. The
overall development process is partitioned into distinct stages, each of which consists
of activities that must be performed in a certain order. The stages are usually
sequential with formal “sign–off” agreements among end users and data processing
Managing the Digital Firm, Seventh Canadian Edition
During the conversion phase, technical specialists prepare a conversion plan and
supervise conversion. Business users evaluate the new system and decide when the
The main advantages of using this method for building information systems are:
• it is highly structured;
• it has a rigorous and formal approach to requirements and specifications and tight
controls over the system building process;
• it is appropriate for building large transaction processing and management
information systems and for building complex technical systems.
Disadvantages are:
• it is very costly and time-consuming;
Define information system prototyping. Describe its benefits and limitations. List
and describe the steps in the prototyping process.
Information system prototyping is an explicitly interactive system design
methodology that builds an experimental model of a system as a means of
determining information requirements. Prototyping builds an experimental system
quickly and inexpensively for demonstration and evaluation so that users can better