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Information systems for managers in a global economy.

Information systems of the sixties focused on specific transaction-processing systems within an organization. In the seventies, integration of functional systems was stressed. In the eighties, information technology platforms focused on integrated database and communication systems for the geographically-dispersed organization. The nineties will bring a growing need for designing information systems that support executive decisions for complex and varied operations within a global economy. Executive approaches to key strategic issues and planning decisions must change, and information systems must also change.

In several studies of key information system (IS) issues during the eighties, IS professionals ranked improved strategic planning as a top IS issue. However, information systems planning surely does not exist in a vacuum. Planning is a basic function of management. Strategic issues in information systems are contingent upon the organizational environment and the business plan.

A tool for linking a business unit and IS planning is an IS architecture. An information architecture is a subset of the IS plan that identifies the desired platform of available and projected information technologies. Its goal is to link this platform to the mission of the business unit.

Most IS planning articles deal with specific methods for creating a close association between existing business unit plans and IS planning, specific planning methodologies, or information architecture prescriptions. Directions for a changing view of information systems for dispersed operations in a global economy have received little attention.

SURVEY OF INFORMATION LINKS TO STRATEGIC DECISIONS

As part of a research project on information used in strategic planning, about 100 executives from 25 organizations were interviewed during the mid-eighties. Questions asked of the executives concerned organizational mission, planning, strategic decisions, information sources, and productivity issues.

The key strategic issues suggested by executives were market choices, financing, pricing, product or service engineering, technology changes, and manpower. In fact, over half the strategic decisions named were market choice related. Only a few of the executives considered productivity to be a strategic issue. The majority stated that productivity was strictly an operational concern. Interestingly, evaluations of strategic decisions were uniformly based upon standard, short-term, internal financial reports and information.

A serendipitous finding was that productivity," strategic," planning," and "information" are generally "loaded" words within each organizational context. These personal psychological presets regarding common terms make new programs in these areas very difficult to administer or discuss. Planning is generally thought to be a traffic-cop group for the annual budgeting process. Strategic analysis is considered to be a set of sessions conducted by a consultant to produce a document which no one uses. Productivity is often a special program name for cutting staff and costs. Strategic information means last month's internal sales and financial reports.

Is productivity a strategic issue? It positively was not for the executives interviewed. Should productivity be a strategic issue concerning the proper use of human and technical inputs to produce a product or service with value in a global economy? Because of world competition, it must be. A new approach to producing information for strategic decisions related to organizational productivity is needed.

CASE STUDY FINDINGS CONCERNING STRATEGIC DECISIONS

Two financial organizations agreed to take part in a more extensive evaluation of strategic decisions and information sources. These two organizations supplied access to all systems, reports, and executives. These in-depth case studies confirmed the emphasis on internal, short-term reports and provided insight into issues related to strategic decisions and information. Summary findings for the two organizations are given with the labels Firm A and Firm B.

Firm A used a standard and traditional approach to banking. This was illustrated by the approaches to linking tactics to strategies. Approaches included group goals related to business and profit plans, performance reviews tied to profit plans, proposal approvals within the tone of business plans, extensive policy manuals for operational decisions, and a hierarchy of management committees to set procedures. The style in making strategic decisions could be described as centralized with advice from others, intuitive priority setting, reactive and deliberate small changes, and based upon practice and experience. The primary guides for strategic decisions were corporate objectives, consultant meetings, top management communications, and financial objectives for the next five years. Reports accessed from the formal information system were current monthly and quarterly financial reports, past financial reports, annual budgets and profit plans, and monthly alert sheets.

Firm B used a more flexible matrix organization approach. Tactics were linked to strategies through temporary task forces to deal with specific issues, specifying process instead of outcome, setting if/then relationships to environment and internal data, and through monthly and quarterly group-level financial objectives. The style in making strategic decisions could be described as proactive, informal, and non-territorial; results oriented; deliberative and small change; forward-thinking intuitive with analytic follow-up; internally oriented; and intolerant of ambiguity. The primary guides for strategic decisions were general and functional mission statements, a Futures Task Force statement, top management communications, and a long-range delivery system plan. Reports accessed from the formal information system were financial statements, budgets, financial analyses, and forecasts.

Major strategic decisions identified by Firm A executives were what lines of business to be in, how to re-establish a dominant position in local markets, becoming a low-cost provider of service, assessing effects of deregulation, moving to regional financial services and markets, and methods for centralizing loans and operations from branches. Major strategic decisions identified by Firm B executives were market differentiation, acquiring deposits at low cost, loan volume and deposit acquisition, what services to deliver in a deregulated market, future of the branch system, use of technology and automation, relation to regional and national affiliates, and pricing of services.

Some differences between the two firms were obvious from the above. Firm A was clearly a more centralized organization with decisions made primarily by a few top executives. Firm A was also more focused on the past and extensions from current and past internal positions into the immediate future. Firm B relied on task forces to assess and evaluate the future environment and then the identified strategic decisions were an attempt to respond to the expected changes.

Strategic decisions for both firms had a significant external flavor with an implied in-depth knowledge of status and components of existing organizational systems. However, the information sources for both organizations were recent financial reports except for some economic forecast reports in Firm B. Information and data about both internal and external factors and systems had not been accessed for strategic decisions. The internal database did exist in both organizations, but the models and inquiry systems for executive interface did not exist. Neither organization had developed external databases or links to external data sources except for the economic forecasts in Firm B. Also, Firm A did not seem aware of the need to evaluate ambiguous data and environmental signals. Firm B was aware of ambiguity in the market forces but was intolerant of dealing with it in its task forces.

Given the national disaster in financial organizations and the rapidly changing world political and economic environment, more complex models and expertise in dealing with possible future scenarios are clearly needed. Perhaps a complete systems view of information systems would help.

A SYSTEMS MODEL OF INFORMATION SYSTEMS

A systems model of information systems is presented at the top of page 11. This model stresses the role of policies, decision support system interfaces, external data sources, the environment, and feedback. The focus in the model is on the decision point. With the transaction processing systems and integrated functional systems already in place in most organizations, the emphasis can now be shifted to critical tactical decisions related to strategies. These decisions are affected most heavily by top management policies about direction of the firm. Some standard information such as financial reports is communicated to the manager at the decision point in a conventional fashion. For the two case studies described above, these were the only two factors used for key decisions.

The third factor needed by the decision maker is the interface to decision support systems and expert support systems. These model-based systems need direct links to the information base, the database, external data sources, and the environment. Expert support systems also need the direct link to the named expert for the particular decision under consideration. The capability to automate decisions either by policy or by expertise is shown with the programmed decision and expert system blocks. Most decisions will stay directly in the hands of managers as shown by the decision-maker block.

Both direct evaluation of the decision and indirect evaluation from the environmentally-influenced result are depicted in the model. Feedback, both immediate and that which is filtered by the environment, is an important element for effective decisions from both the systems and management literatures. The pervasive influence of the environment is shown in the model. This implicitly highlights the ambiguity of strategic and tactical decisions caused by the risks and uncertainties in the environment.

This systems model of information systems stresses the decision component of management systems. Key design issues center on the decision point and the resulting action implementation for the organization. The role of data capture and processing is important, but it is assumed to be already complete and either available or easily updated for the current decision under analysis. This view of information systems is necessitated by the growing pressure of global operations. It reflects the expanding influence of the environment in an open systems view of information systems as shown in the model. This extension and expansion of the information system model requires a new approach to design based upon the need for change in the approach to strategic and tactical decisions.

A DECISION-ORIENTED, CHANGE-MANAGEMENT APPROACH TO INFORMATION SYSTEMS

For firms with basic systems in place and under the influence of a global environment for key decisions, the two major components of a new approach to information systems design are a thorough analysis of the decision and an intention to change. The four phases of this proposed approach are:

(1) an unfreezing phase for managers and analysts,

(2) a new idea generation phase,

(3) an operationalization phase, and

(4) a refreezing phase.

The unfreezing phase would include activities such as a time allocation analysis, development of decision accounting systems, and explicit analysis of deciding how to decide. The new idea generation phase would include a scan of the environment and identification of alternate strategies and objectives. This would be followed by decision anatomies and identification of feasible output and input.

The operationalization phase includes the technical software and hardware design needed to accomplish the managerial interface and the link to data and information. An IS architecture platform and many automated development and process engineering tools are put to use in this phase. The last phase is an acknowledgement that new information systems call for behavioral changes as well as technical changes. Refreezing implies that some approaches to managerial decisions might have been modified, eliminated, or created anew. Training, education, and management direction are required to achieve the fall effect of the new system.
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Title Annotation:Global Business
Author:Hershauer, James C.
Publication:Business Perspectives
Date:Sep 22, 1990
Words:1835
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