Reading: Lesson 5 - Information Management

6.5.A - Information Management

1. MANAGING TECHNOLOGY

1. As computers became a dominant force throughout the world, organizations needed to manage the computer systems as well as the specialists who operate and manage the systems. In major organizations, the top computer executive is the chief information officer, or CIO. In some organizations, this individual might alternatively be referred to as the chief technology officer, or CTO. The CIO reports to the CEO (chief executive officer). The CIO must have extensive knowledge of electronic equipment along with expert management skills. CIOs must keep up with new technologies and know what types of equipment and services to purchase to meet the organization’s needs. Because many workers use computers, keeping them trained and productive is equally important. CIOs make it possible for all managers and workers who need information to get it easily and quickly from anywhere. CIOs also protect information from being lost, damaged, stolen, or used improperly.
   
2. Most organizations are experiencing a data and information explosion. New computerized methods gather information quickly and have huge storage capacity. As a result, many managers suffer from information overload—the existence of more data and information than can be meaningfully used. Information overload leads to needless costs and inefficiencies as managers try to sort through all the available information to find what they really need to make decisions. Thus, organizations need effective means for managing information. Employees generate business data constantly. They record sales transactions, collect customer data, and track inventory. When employees key such data into their computers, the data become part of the company’s database. A database is a collection of data organized in a way that makes the data easy to find, update, and manage. However, a collection of data is not useful until it is processed into a form that decision makers can use. A computer system that processes data into meaningful information is called an information system. Three key types of information systems are management information systems, decision support systems, and executive information systems.
3. (MIS) integrates data from various departments to make the information available to help managers with day-to-day business operations. An MIS deals with specific and highly structured data. Different departments collect and process the data. Employees enter daily transactions into the system as they occur, such as when they prepare purchase orders and record sales. From this gathered and stored information, managers can request reports to help them make real-time operating decisions. For example, a sales report can show a manager where sales are lower than expected. From this information, the manager might decide to do a special promotion in areas where sales need to improve.
   
4. A decision support system (DSS) helps managers consider alternatives in making specific decisions. For example, a DSS can help a manager determine the most efficient routes for the company’s delivery trucks. The ability to perform what-if analysis is a key capability of a DSS. A manager might ask, What if we continue our current strategy? Would that work? What if we try something else? What are the likely consequences of that action? The company’s management information system provides much of the information for its decision support system. 
   
5. An executive information system (EIS) combines and summarizes ongoing transactions within the company to provide top-level executives with information needed to make decisions affecting the goals and direction of an organization. Information used in executive information systems is gathered from the MIS and DSS. An EIS collects data from both internal and external sources to help executives make decisions. For example, executives might use the EIS to collect outside information that affects the company, such as information regarding competitors, the state of the economy, and government policies. With information from inside and outside the organization, top managers make decisions that help a business survive and grow.

2. NETWORKED COMMUNICATION

1. Businesses use the Internet for communication, both within and outside the company. For businesses, most internal communications use Internet Protocol; this includes tools such as email, file transfers, and data streaming. Using the Internet, a company can post an employee newsletter online. This speeds the information to all employees while reducing mailing and distribution costs. Employees can quickly send reports, memos, and other information to coworkers. However, new tools are available to assist with communications, including Voice over Internet Protocol, or VoIP (using the Internet for telephone services), videophones, and software that allows several people to share applications and collaborate by using text and graphics tools while sitting at their computers.
   
2. Companies use the Internet to communicate with current and potential customers. The Internet has become an important way to provide information about the company and its products to customers. As businesses move to improve communications, they are increasingly turning to the Internet. Search engines are now the primary way that individuals go to a company’s website. By using the Internet, a customer can often obtain product descriptions, find out when a business is open, and even map the location of the business. If a business has not posted information about its location, products, and services on the Inter- net, it will likely miss customers. The center of business communication is the Internet. Managers send emails, exchange documents, and sell their company’s products and services to other businesses. Common business-to-business services offered via the Internet include online training, financial planning and accounting, maintenance of personnel records, and data processing.
   
3. One of the major concerns of chief information officers is information security. The CIO must do whatever is necessary to make certain that hackers cannot steal, destroy, or alter information. In addition, the CIO must protect the company’s information from being accidentally released by staff. The consequence of not controlling information—whether from the actions of employees or external thieves— may be lawsuits by employees, customers, suppliers, and the public, as well as the loss of critical company records. Information managers must balance the need to collect the information necessary to serve customers and the company’s ethical responsibility when gathering—and sometimes selling—information about people who use the Internet to browse or buy merchandise. Programs launched from websites can track your travels from website to website. Where you go frequently on the Web reveals your general interests and what you buy. After collecting this information, some firms may sell it to businesses related to your interests. For example, if you frequently look at websites related to music or games, firms that sell these goods and services may contact you and try to sell you their products. Information managers should fully inform users on how personal data will be used.
   
4. In late 2013, retailer Target was hacked and customer information was compromised. Over 70 million customers were at risk of having some of their personal information used without authorization, including names, mailing addresses, phone numbers, and email addresses. Full settlement with customers who were impacted by this data breach took well more than a year to reach. When you buy goods on the Net, you must provide basic information such as name, address, telephone number, and email address. Often websites store this information on your computer as a “cookie” file that a website can retrieve when you visit again. This is helpful for repeat customers. However, the business can also sell this personal information to other businesses without your knowledge. 
   
5. Good business practices—as well as the Federal Trade Commission—require businesses to notify buyers of their rights and how personal information will be used. However, some businesses may not properly inform website visitors of their rights or may continue to sell confidential information after customers have opted out of information sharing. These actions are unethical and sometimes illegal. Companies must also develop defensive strategies to protect electronic information. Such strategies often include: requiring user passwords, security phrases, and captchas to access data; saving information as backup files; and encrypting information to make it unreadable to others.
   
6. Information managers must ensure that their firms use firewall systems to protect information from outsiders who try to break into their networks. A firewall uses special software that screens people who enter a network by requesting specific information such as passwords. Passwords should change frequently. Nevertheless, even firewalls are not completely hacker-proof. Other safety systems are either available or being developed. For example, fingerprint scanning, voice verification, and retina scanning are among the methods being used to safeguard organizational information.
   

3. IMPROVING BUSINESS OPERATIONS

1. The Internet has become an important tool to improve business operations and control costs. Salespeople can log on to the company’s website and determine if a certain product is in inventory. When a product is sold, the order can immediately be entered into the computer from anywhere in the world to speed the processing and shipping of the order. A production manager can access the records of a transportation company to see when an expected shipment of raw materials is scheduled for delivery. An accountant in a branch office can download financial statements to compare current financial performance with last year’s information. Product designers in three different countries can collaborate by examining a three-dimensional drawing online and making changes that each of them can see instantly.
   
2. Managers of small businesses can benefit competitively from the use of the Internet. Many small businesses have their own websites to provide information to customers. This is an inexpensive way to provide information about products and services to global markets. Customer databases can be used to send emails about products or events as a way to build and maintain relationships with customers. Inventory levels can be linked to suppliers, so products can be reordered automatically from suppliers when needed, lowering inventory carrying costs.
   
3. Many companies use their extranets to access multiple sources of information to create digital dashboards. A digital dashboard is a management information system that allows multiple sources of information to be displayed graphically on a computer. Like the dashboard in a car, a digital dashboard provides access to real-time information. Managers are able to track company information the way investors are able to track the changing stock market through charts, graphs, and summary spreadsheets. A manager can then “drill down” to other relevant information to help make decisions. For example, if managers see a change in income in a product line, they can call up the records related to these products to see where changes have occurred.