Chapter 2

Information Systems Defined

Learning objectives
• To define the terms information system (IS) and information technology (IT) and articulate the
difference
• between the two concepts.
• To define the terms information system success and information system failure.
• To discuss the principal reasons modern firms create and deploy information systems.
• To discuss the influence of the firm’s context and the external environment in which it is
embedded
• on organizational information systems.
• To identify the four components that make up an information system and the manner in which
• they interact.
• To explain how to design successful information systems and how to troubleshoot problematic
• information systems implementations.
Introduction
• Modern organizations around the world continue to spend significant
amounts of money on IT
• A narrow focus on IT investments alone is problematic. Organizations
should instead focus on information systems (IS) and their design
IS ≠ IT
• Ricasoli Winery
• 1141: Opened
• Oldest winery in Italy
• Did they have an information
system in 1141?
 IS
• Information systems are formal, sociotechnical, organizational
systems designed to collect, process, store, and distribute information
• Formal IS:
• Companies’ supply chain systems
• Informal IS:
• Snapchat
The four components of IS
• Technology
• Process
• People
• Structure
For general and functional managers
• It is important to have a solid understanding of the characteristics of
each of the four components
• It is necessary to understand how the 4 components relate and
interact with one another

• In order to make appropriate business decisions

Information Technology
• Defined as hardware, software,
and telecommunication
equipment
• IT is a cornerstone of any
modern IS
• IT enables and constrains action
through rules of operation that
stem from its design
Process
• Defined here as the series of
steps necessary to complete a
business activity
• The same activities can be
performed using a variety of
different business processes
Take in mind
• The potential discrepancies between business processes as designed
by the organization and the manner in which they are actually
enacted by people is often the root cause of IS failure
• When designing a new IS or when confronted with IS failure, it helps
to think about what possible obstacles exist that may make it difficult
for employees to accurately follow the business process
People
• Individuals or groups directly involved in the information system:
• end users
• managers
• IT professionals
• A genuine understanding of the people involved, including their skills,
interests, and motivations, is necessary when designing and
implementing a new IS or when troubleshooting an existing IS that is
not performing as expected
Structure
• The organizational design (hierarchy, decentralized); reporting
(functional, divisional, matrix); and relationships (communication and
reward mechanisms) within the information system
• The implicit or explicit rules that govern relationships between the
people involved in the information system
• Understanding the structure component is crucial because user
resistance, incentive systems, and relationships are often silent
enemies of IS success that go undetected before, and sometimes
even after, IS failure becomes apparent
Systemic effects
• The four components of an Information System are interdependent,
so changes in one component may affect all other components of the
system and, if not properly managed, its outputs
• You must ensure the proper interaction of IT with the other
components
• The importance of systemic effects is critical not only when designing
a new system but also when troubleshooting an existing one that is
underperforming
The Purpose of Information Systems
• Fulfilling organizational information processing needs
• Improving efficiency and effectiveness while reducing cost
• Achieving a (specified) Information System goal

• Example: A large retail store (Walmart, Carrefour) design an IS to

increase the efficiency and speed of customer checkout, perhaps
using self-checkout stations
Successful Information Systems
• Has the system delivered expected results?
• What are some of the unintended results?
• Positive
• Negative
• An information system is a failure if it is abandoned (i.e., the design
and implementation phase is never concluded) or not used (i.e., the
information system is completed only to be rejected by its intended
users)
Information Systems Outcomes
• Beyond efficiency and effectiveness improvements and the associated
financial considerations, IS have other direct and indirect effects on
people within and outside the firm:
• Positive: empowering employees’ and widening the scope of their
responsibility
• Negative: deskilling loss of responsibility, and the creation of a monotonous
working environment
• Moreover, IS use pertains to their effect on future opportunities
available to the firm. This is due to the fact that future systems
typically rely on, or connect with, preexisting ones
IS in the Organizational Context
• Every organization is unique:
• Firm strategy: The manner in which the organization intends to achieve its
objectives
• Firm culture: The collection of beliefs, expectations, and values shared by the
members of an organization
• Infrastructure: The set of shared IT resources and services of the firm,
constrains and enables opportunities for future information systems
implementations
The External Environment
• Organizations themselves don’t exist in a vacuum but instead are
embedded in the external environment that encompasses:
• The regulation
• The competitive landscape
• The general business and social trends
IS in Context
IS and Organizational Change
Three levels of organizational change:
• First-Order: Automate
• Second-Order: Informate
• Third-Order: Transform
First-Order Change: Automate
• First-order change only affects
the Technical System
• It occurs when an IT innovation
is introduced that modifies how
an existing process is performed
• Managing it is:
• Easiest to envision
• Easiest to justify
• Easiest to manage
Second-Order Change: Informate
• Second-order change affects the People
component:
• The way individuals perform processes and
the manner in which they interact with the
technology change
• It occurs when the information intensity
of the process being performed changes
substantially due to the introduction of
new IT
• Key challenges on managing it are:
• Provide appropriate training
• Overcome the human tendency to resist
change
Third-Order Change: Transform
• Third-order change affects the
Structure component:
• Technology  a change in the way the
organization selects, uses, and manages
technology
• People  a change in the reporting and
authority structure of the organization
• Process  a novel way of task
accomplishment or a new set of task
• Managing it requires significant
managerial and executive involvement
Implications
• IT product should not be the point of departure but rather the point
of arrival of your information system design effort
• Strategy may be inspired, not driven, by IT
• Never forget the systemic effects: the components of an IS mutually
influence one another
• Anticipate these ripple effects and proactively manage them before they
become a cause for concern
• An information system is not designed “once and for all” as if it were a
static artifact
Implications
• Organizations are dynamic: IS goals and needed information
processing functionalities need to be re-evaluated often
• The design and use of an IS should be seen as an iterative process
involving:
• The cyclical evaluation of individual IS components
• The assessment of how different organizational systems work together to
support the business
• A reevaluation of the current IS design any time a major change occurs
• Optimize the Information System as a whole, not the components
individually
Summary
Information systems are designed and built with the objective of improving the
firm’s efficiency and effectiveness by fulfilling its information processing needs.
Successful information systems are those that are used and that achieve their
intended goals.
Information systems exist in an organizational context, characterized by the firm’s
strategy, culture, and IT infrastructure. The organization itself is subject to the
influences of its external environment, including regulatory requirements, social
and business trends, and competitive pressures.
Summary
Information systems are subject to systemic effects, because the different
components of a system are interdependent and that changes in one component
affect all other components of the system. Thus, when designing a new information
system or troubleshooting an underperforming one, you have a portfolio of options
for achieving the system’s goal.
Increasingly, in modern firms, organizational change stems from the introduction of
new information technology. Depending on the objectives and reach of the new
system, we identify three levels of change—first-, second-, and third-order change
—each requiring different levels of commitment and sponsorship to be successfully
managed.
What we learned
• To define the terms information system (IS) and information technology (IT) and articulate the
difference
• between the two concepts.
• To define the terms information system success and information system failure.
• To discuss the principal reasons modern firms create and deploy information systems.
• To discuss the influence of the firm’s context and the external environment in which it is
embedded
• on organizational information systems.
• To identify the four components that make up an information system and the manner in which
• they interact.
• To explain how to design successful information systems and how to troubleshoot problematic
• information systems implementations