Chapter Two

Foundational concepts in MIS

2.1. System concepts

A system can be simply defined as a group of interrelated or interacting elements forming a
unified whole. Many examples of systems can be found in the physical and biological sciences,
in modern technology, and in human society. Thus, we can talk of the physical system of the sun
and its planets, the biological system of the human body, the technological system of an oil
refinery, and the socioeconomic system of a business organization.

A system is a group of interrelated components (sub systems or elements) that operate together
to achieve a common objective by accepting inputs and producing outputs in an organized
transformation process. Such system sometimes called a “dynamic system. It has three basic
interacting components or functions: input, process and output. Moreover, the systems concept
can be made even more usefully including two additional components: feedback and control. A
system with feedback and control components is sometimes called a “cybernetic” system that is,
self-monitoring, self-regulating system. A familiar example of a self-monitoring, self-regulating
system is the thermostat controlled heating system found in many homes; it automatically
monitors and regulates itself to maintain a desired temperature. Another example is the human
body, which can be regarded as cybernetic system that automatically monitors and adjusts
many of its functions, such as temperature, heartbeat, and breathing.

2.1.1. Characteristics of Systems

A system does not exist in a vacuum; rather, it exists and functions in and environment
containing other systems. If a system is one of the components of a larger system, it is called a
subsystem, and the larger system is its environment. Also, a system is separated from its
environment and other systems by its system bounder. Several systems may share the same
environment. Some of these systems may be connected to one another by means of a shared
boundary, or interface. Normally, a system that interacts with other systems in its environment is
called an open system. If a system has the ability to change itself in its environment in order to
survive; it is known as an adaptive system.

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Example
Organizations such as businesses and government agencies are good examples of the systems
in society, which is their environment. Society contains a multitude of such systems, including
individuals and their social, political, and economic institutions. Organizations themselves
consist of many subsystems, such as departments, divisions, process teams, and other
workgroups. Organizations are examples of open systems because they interface and
interact with other systems in their environment. Finally, organizations are examples of
adaptive systems, since they can modify themselves to meet the demands of a changing
environment.

2.2. A Systems approach to problem solving

A system approach is an approach to solve organizational problems that demands managers to
consider an organization as a system and it is based on the scientific method. It includes the
following stapes.

1. Understanding a problem or opportunity

Understanding a problem is considered solving part of the problem because without having good
deal of understanding of the problem, we cannot solve problem or pursue an opportunity. To
better understanding the problem, we need to separate problems from symptoms, view the
problem or opportunity in a systems context, and determine objectives and constraints.

a) Separating problems or opportunities from symptoms

Symptoms are merely signals of an underling cause or problem. A problem is a basic condition
that is causing undesired results. An opportunity is a basic condition that presents the potential
for desired results. For example, the fact that “sales are declining” is a symptom, not a properly
defined problem.

b) View the problem or opportunity in a systems context

When you use a systems context, you try to find systems, subsystems, and components of
systems in the situation you are studying. This ensures that important factors and their
interrelationships are considered. Thus, to understand a problem or opportunity, you must

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understand both the organizational systems and environmental systems in which the problem or
opportunity arises and asses the relationship among the system.

1. Environmental systems

A business is a subsystem of society and is surrounded by other systems of the business

environment. It is an open, adaptive system, exchanging inputs and outputs with its environment
and adjusting to the demands of various environmental systems. A business tries to maintain
proper interrelationships with the economic, political, and social stakeholders in its environment.

2. Organizational subsystems

A business is typically subdivided into various organizational subsystems. For example, most
businesses are organized into departments, divisions, and other types of business units. Firms
may also be subdivided into subsystems such as project teams, product groups, task forces, etc.
Whatever the case, you must try to identify these subsystems, the boundaries of each subsystem,
and their relationships to each other. The process is called decomposition. Then, you should try
to isolate those subsystems most affected by the problem or opportunity you are studying.

C. Evaluating selected systems

The specific systems (or subsystems) in which a problem or opportunity arises should be viewed
as systems of input, processing, output, feedback, and control components.
Control

Poor sales
management
Feedback Incorrect sales information

Poor sales
Out-of-Date performance
Inadequate
sales
Selling

Input Processing Output

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For example, you could view the sales department of a business as a system and then you could
then ask: are poor sales performance (output) caused by inadequate selling effort (input), out-to-
date sales procedures (processing), incorrect sales information (feedback), or poor sales
management (control)?

2. Developing a solution

This is the second stage of the systems approach to problem solving. It consists designing and
evaluating of alternative solutions.

a. Designing alternative solutions

They are usually several different ways to solve any problem or pursue any opportunity. Jumping
immediately from problem definition to a single solution is not a good idea. It limits your options
and robs you of the chance to consider the advantages and disadvantages of several alternatives.
You also lose the chance to combine the best points of several alternatives. Having too many
alternatives can obscure the best solution. As a result, here we list potentially possible alternative
solutions for the problem identified.

b. Evaluating alternative solutions

Once alternative solutions have been developed, they must be evaluated so that the best solution
can be identified. The goal of evaluation is to determine how well each alternative solution meets
your business and personal requirements. These requirements are key characteristics and
capabilities that you feed are necessary for your personal or business success.

Example
If you were the sales manager of a company, you might develop very specific requirements for
solving the sales-related information problems of your salespeople. You would probably insist
that any computer-based solution for your sales force be very reliable and easy to use. You might
also require that any proposed solution have low start-up costs, or have minimal operating costs
compared to present sales processing methods.

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Then you would develop evaluation criteria and determine how well each alternative solution
meets these criteria. The criteria you develop will reflect how you previously defined business
and personal requirements. For example, you will probably develop criteria for such factors as
start-up costs, operating costs, ease of use, and reliability.
Criteria may be ranked or weighted, based on their importance in meeting your requirements.

3. Selecting the Best Solution

Once all alternative solutions have been evaluated, the process of selecting the best solution can
begin. Alternative solutions can be compared to each other because they have been evaluated
using the same criteria.
Note:-It is possible that we will decide not to select the top-ranked alternative. A lower-ranked
solution could be chosen for a variety of other reasons. Or, all proposed alternatives could be
rejected. However, do not forget that the legitimate alternative of “doing nothing” could be
selected as the best option.

4. Implement the selected solution

Once a solution has been selected, it must be implemented. An implementation plan specifies the
activities, resources, and timing needed for proper implementation.
For example, the following items might be specified:
 Types and sources of hardware and software
 Construction of physical facilities
 Hiring and training of personnel
 Start-up and operating procedures
 Implementation timetables.

5. Evaluate the Success of the Implemented Solutions

The results of implementing a solution should be monitored and evaluated. This is called a post
implementation review process. The focus of this step is to determine if the implemented
solution has indeed helped the firm and selected business units meet their system objectives. If
not, the systems approach assumes you will cycle back to previous step and attempt to find a
workable solution.

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2.3. Data, Information, Knowledge and Wisdom

There is an important distinction between data, information, knowledge, and wisdom. Chapter 1
defines data streams of raw facts representing events occurring in organizations or the physical
environment before they have been organized and arranged into a form that people can
understand and use.
To turn data into useful Information, a firm must expend resources to organize data into
categories of understanding, such as monthly, daily, regional, or store-based reports of total
sales. So information can be defined as data that have been shaped into a form that is meaningful
and useful to human beings.

Knowledge includes Concepts, experience, and insight that provide a framework for creating,
evaluating, and using information. To transform information into knowledge, a firm must
expend additional resources to discover patterns, rules, and contexts where the knowledge works.

Finally, wisdom is thought to be the collective and individual experience of applying knowledge
to the solution of problems. Wisdom involves where, when, and how to apply knowledge.
Knowledge is both an individual attribute and a collective attribute of the firm. Knowledge is a
cognitive, even a physiological, event that takes place inside peoples’ heads. It is also stored in
libraries and records, shared in lectures, and stored by firms in the form of business processes
and employee know-how.

Knowledge residing in the minds of employees that has not been documented is called tacit
knowledge, whereas knowledge that has been documented is called explicit knowledge.
Knowledge can reside in e-mail, voice mail, graphics, and unstructured documents as well as
structured documents. Knowledge is generally believed to have a location, either in the minds of
humans or in specific business processes. Knowledge is “sticky” and not universally applicable
or easily moved. Finally, knowledge is thought to be situational and contextual. For example,
you must know when to perform a procedure as well as how to perform it.

We can see that knowledge is a different kind of firm asset from, say, buildings and financial
assets; that knowledge is a complex phenomenon; and that there are many aspects to the process
of managing knowledge. We can also recognize that knowledge-based core competencies of
firms—the two or three things that an organization does best—are key organizational assets.
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Knowing how to do things effectively and efficiently in ways that other organizations cannot
duplicate is a primary source of profit and competitive advantage that cannot be purchased easily
by competitors in the marketplace.

For instance, having a unique build-to-order production system constitutes a form of knowledge
and perhaps a unique asset that other firms cannot copy easily. With knowledge, firms become
more efficient and effective in their use of scarce resources. Without knowledge, firms become
less efficient and less effective in their use of resources and ultimately fail.

2.4. The information systems function in the business

We’ve seen that businesses need information systems to operate today and that they use many
different kinds of systems. But who is responsible for running these systems? Who is responsible
for making sure the hardware, software, and other technologies used by these systems are
running properly and are up to date? End users manage their systems from a business standpoint,
but managing the technology requires a special information systems function. In all but the
smallest of firms, the information systems department is the formal organizational unit
responsible for information technology services. The information systems department is
responsible for maintaining the hardware, software, data storage, and networks that comprise the
firm’s IT infrastructure. The information systems department consists of specialists, such as
programmers, systems analysts, project leaders, and information systems managers.
Programmers are highly trained technical specialists who write the software instructions for
computers.

Systems analysts constitute the principal liaisons between the information systems groups and
the rest of the organization. It is the systems analyst’s job to translate business problems and
requirements into information requirements and systems.

Information systems managers are leaders of teams of programmers and analysts, project
managers, physical facility managers, telecommunications managers, or database specialists.
They are also managers of computer operations and data entry staff. Also, external specialists,
such as hardware vendors and manufacturers, software firms, and consultants, frequently
participate in the day-to-day operations and long-term planning of information systems.

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In many companies, the information systems department is headed by a chief information
officer (CIO). The CIO is a senior manager who oversees the use of information technology in
the firm. Today’s CIOs are expected to have a strong business background as well as information
systems expertise and to play a leadership role in integrating technology into the firm’s business
strategy. Large firms today also have positions for a chief security officer, chief knowledge
officer, and chief privacy officer, all of whom work closely with the CIO.

The chief security officer (CSO) is in charge of information systems security for the firm and is
responsible for enforcing the firm’s information security policy. (Sometimes this position is
called the chief information security officer [CISO] where information systems security is
separated from physical security.) The CSO is responsible for educating and training users and
information systems specialists about security, keeping management aware of security threats
and breakdowns, and maintaining the tools and policies chosen to implement security.

Information systems security and the need to safeguard personal data have become so important
that corporations collecting vast quantities of personal data have established positions for a chief
privacy officer (CPO). The CPO is responsible for ensuring that the company complies with
existing data privacy laws.

The chief knowledge officer (CKO) is responsible for the firm’s knowledge management
program. The CKO helps design programs and systems to find new sources of knowledge or to
make better use of existing knowledge in organizational and management processes.

End users are representatives of departments outside of the information systems group for
whom applications are developed. These users are playing an increasingly large role in the
design and development of information systems. In the early years of computing, the information
systems group was composed mostly of programmers who performed highly specialized but
limited technical functions. Today, a growing proportion of staff members are systems analysts
and network specialists, with the information systems department acting as a powerful change
agent in the organization. The information systems department suggests new business strategies
and new information-based products and services, and coordinates both the development of the
technology and the planned changes in the organization.

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2.5. E-Business, E-Commerce, and E-Government

The systems and technologies we have just described are transforming firms’ relationships with
customers, employees, suppliers, and logistic partners into digital relationships using networks
and the Internet. So much business is now enabled by or based upon digital networks that we use
the terms “electronic business” and “electronic commerce”.

Electronic business, or e-business, refers to the use of digital technology and the Internet to
execute the major business processes in the enterprise. E-business includes activities for the
internal management of the firm and for coordination with suppliers and other business partners.
It also includes electronic commerce, or e-commerce.

E-commerce is the part of e-business that deals with the buying and selling of goods and
services over the Internet. It also encompasses activities supporting those market transactions,
such as advertising, marketing, customer support, security, delivery, and payment. The
technologies associated with e-business have also brought about similar changes in the public
sector. Governments on all levels are using Internet technology to deliver information and
services to citizens, employees, and businesses with which they work.

E-government refers to the application of the Internet and networking technologies to digitally
enable government and public sector agencies’ relationships with citizens, businesses, and other
arms of government. In addition to improving delivery of government services, e-government
makes government operations more efficient and also empowers citizens by giving them easier
access to information and the ability to network electronically with other citizens. For example,
citizens in some states can renew their driver’s licenses or apply for unemployment benefits
online, and the Internet has become a powerful tool for instantly mobilizing interest groups for
political action and fund-raising.