Chapter 13 Summary: Building Information Systems

As the text has previously mentioned in early chapters, information systems are more than just the technology and new software that is installed for a company. Information systems encompass the business plans, new hardware, and jobs associated with the information systems. New information systems are a major undertaking for any company, large or small. They bring about incredible organizational change. There are four types of structural organization enabled changes: automation, rationalization, business process redesign, and paradigm shifts.

The most common form is automation and this simply means to automate or refine processes to be more efficient. An example could be replacing several data entry clerks with an information system database that automatically inputs the data and eliminates the need for the data entry clerks. Automation is low risk investment and can usually yield good results for a company to speed up processes and eradicates expensive payroll and employee costs.

The second type of IT-enabled organization change is rationalization of procedures. This type of change is similar to automation in that it simplifies business processes but it also finds loopholes or problems with processes and procedures and finds ways to improve workflow. Rationalization also takes into account total quality management in an effort for a company to reach its full quality potential.

The third type of organization change is business process redesign. This is a complete overhaul of the business processes. It’s more complex than automation and eliminates any unnecessary work, paper, old or outdated technology, jobs, etc.  A redesign has higher risk but usually results in a higher return on investment. An example might be Wal-Mart’s automatic re-stocking system. The systems keep track of everything purchased and more stock is re-ordered and shipped automatically when it’s needed. This information system was a total business process redesign.

Lastly, the final organizational change is called a paradigm shift. This type of change is more or less changing the entire company and more so what the company does. An example could be a company that manufactures siding for homes to a company that engineers an entirely new type of siding or home exterior product. A paradigm shift could be even more dramatic and the company could change to a roofing company. The risks are obviously higher when implementing an information technology system that will change the entire structure and purpose of your company but the rewards can be equally high.

Source: Laudon, Kenneth C. & Jane P. Laudon. Management Information Systems: Managing the Digital Firm 12^th ed. Pearson Hall, 2010.