Lego the crisis case study

Copyright © 2016 John Wiley & Sons, Inc.

Copyright © 2016 John Wiley & Sons, Inc.

Managing and Using Information Systems

A STRATEGIC APPROACH

Sixth Edition

Keri E. Pearlson KP Partners

Carol S. Saunders W.A. Franke College of Business

Northern Arizona University

Dr. Theo and Friedl Schoeller Research Center for Business and Society

Dennis F. Galletta Katz Graduate School of Business

University of Pittsburgh, Pittsburgh, PA

Copyright © 2016 John Wiley & Sons, Inc.

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ISBN: 978-1-119-24428-8 (BRV)

ISBN: 978-1-119-24807-1 (EVALC)

Library of Congress Cataloging-in-Publication Data

Names: Pearlson, Keri E. | Saunders, Carol S. | Galletta, Dennis F.

Title: Managing and using information systems: a strategic approach / Keri

E. Pearlson, Carol S. Saunders, Dennis F. Galletta.

Description: 6th edition. | Hoboken, NJ : John Wiley & Sons, Inc., [2015] |

Includes index.

Identifiers: LCCN 2015041210 (print) | LCCN 2015041579 (ebook) | ISBN 9781119244288 (loose-leaf : alk. paper) |

ISBN 9781119255208 (pdf) | ISBN 9781119255246 (epub)

Subjects: LCSH: Knowledge management. | Information technology—Management. |

Management information systems. | Electronic commerce.

Classification: LCC HD30.2 .P4 2015 (print) | LCC HD30.2 (ebook) | DDC 658.4/038011—dc23

LC record available at http://lccn.loc.gov/2015041210

Printing identification and country of origin will either be included on this page and/or the end of the book. In addition, if the ISBN on this

page and the back cover do not match, the ISBN on the back cover should be considered the correct ISBN.

Printed in the United States of America

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To Yale & Hana

To Rusty, Russell, Janel & Kristin

To Carole, Christy, Lauren, Matt, Gracie, and Jacob

Copyright © 2016 John Wiley & Sons, Inc.

iv

Information technology and business are becoming inextricably interwoven. I don ’ t think anybody can talk

meaningfully about one without the talking about the other.

Bill Gates

Microsoft 1

I ’ m not hiring MBA students for the technology you learn while in school, but for your ability to learn about, use

and subsequently manage new technologies when you get out .

IT Executive

Federal Express 2

Give me a fi sh and I eat for a day; teach me to fi sh and I eat for a lifetime .

Proverb

Managers do not have the luxury of abdicating participation in decisions regarding information systems (IS).

Managers who choose to do so risk limiting their future business options. IS are at the heart of virtually every

business interaction, process, and decision, especially when the vast penetration of the Web over the last 20 years

is considered. Mobile and social technologies have brought IS to an entirely new level within fi rms and between

individuals in their personal lives. Managers who let someone else make decisions about their IS are letting

someone else make decisions about the very foundation of their business. This is a textbook about managing and

using information written for current and future managers as a way to introduce the broader implications of the

impact of IS.

The goal of this book is to assist managers in becoming knowledgeable participants in IS decisions. Becoming

a knowledgeable participant means learning the basics and feeling comfortable enough to ask questions. It does

not mean having all the answers or having a deep understanding of all the technologies out in the world today. No

text will provide managers everything they need to know to make important IS decisions. Some texts instruct on

the basic technical background of IS. Others discuss applications and their life cycles. Some take a comprehensive

view of the management information systems (MIS) fi eld and offer readers snapshots of current systems along with

chapters describing how those technologies are designed, used, and integrated into business life.

This book takes a different approach. It is intended to provide the reader a foundation of basic concepts relevant

to using and managing information. This text is not intended to provide a comprehensive treatment on any one

aspect of MIS, for certainly each aspect is itself a topic of many books. This text is not intended to provide readers

enough technological knowledge to make them MIS experts. It is not intended to be a source of discussion of any

particular technology. This text is written to help managers begin to form a point of view of how IS will help or

hinder their organizations and create opportunities for them.

The idea for this text grew out of discussions with colleagues in the MIS area. Many faculties use a series of

case studies, trade and popular press readings, and Web sites to teach their MIS courses. Others simply rely on one

of the classic texts, which include dozens of pages of diagrams, frameworks, and technologies. The initial idea for

this text emerged from a core MIS course taught at the business school at the University of Texas at Austin. That

course was considered an “appetizer” course—a brief introduction into the world of MIS for MBA students. The

course had two main topics: using information and managing information. At the time, there was no text like this

Preface

1 Bill Gates, Business @ the Speed of Thought. New York: Warner Books, Inc. 1999. 2 Source: Private conversation with one of the authors.

Copyright © 2016 John Wiley & Sons, Inc.

vPreface

one; hence, students had to purchase thick reading packets made up of articles and case studies to provide them the

basic concepts. The course was structured to provide general MBA students enough knowledge of the MIS field so

that they could recognize opportunities to use the rapidly changing technologies available to them. The course was

an appetizer to the menu of specialty courses, each of which went much more deeply into the various topics. But

completion of the appetizer course meant that students were able to feel comfortable listening to, contributing to,

and ultimately participating in IS decisions.

Today, many students are digital natives—people who have grown up using information technologies (IT) all

of their lives. That means that students come to their courses with significantly more knowledge about things such

as tablets, apps, personal computers, smartphones, texting, the Web, social networking, file downloading, online

purchasing, and social media than their counterparts in school just a few years ago. This is a significant trend

that is projected to continue; students will be increasingly knowledgeable the personal use of technologies. That

knowledge has begun to change the corporate environment. Today’s digital natives expect to find in corporations

IS that provide at least the functionality they have at home. At the same time, these users expect to be able to work

in ways that take advantage of the technologies they have grown to depend on for social interaction, collaboration,

and innovation. We believe that the basic foundation is still needed for managing and using IS, but we understand

that the assumptions and knowledge base of today’s students is significantly different.

Also different today is the vast amount of information amassed by firms, sometimes called the “big data” prob-

lem. Organizations have figured out that there is an enormous amount of data around their processes, their interac-

tions with customers, their products, and their suppliers. These organizations also recognize that with the increase

in communities and social interactions on the Web, there is additional pressure to collect and analyze vast amounts

of unstructured information contained in these conversations to identify trends, needs, and projections. We believe

that today’s managers face an increasing amount of pressure to understand what is being said by those inside and

outside their corporations and to join those conversations reasonably and responsibly. That is significantly different

from just a few years ago.

This book includes an introduction, 13 chapters of text and mini cases, and a set of case studies, supplemental

readings, and teaching support on a community hub at http://pearlsonandsaunders.com. The Hub provides faculty

members who adopt the text additional resources organized by chapter, including recent news items with teaching

suggestions, videos with usage suggestions, blog posts and discussions from the community, class activities, addi-

tional cases, cartoons, and more. Supplemental materials, including longer cases from all over the globe, can be

found on the Web. Please visit http://www.wiley.com/college/pearlson or the Hub for more information.

The introduction to this text defends the argument presented in this preface that managers must be knowledge-

able participants in making IS decisions. The first few chapters build a basic framework of relationships among

business strategy, IS strategy, and organizational strategy and explore the links among them. The strategy chapters

are followed by ones on work design and business processes that discuss the use of IS. General managers also need

some foundation on how IT is managed if they are to successfully discuss their next business needs with IT pro-

fessionals who can help them. Therefore, the remaining chapters describe the basics of information architecture

and infrastructure, IT security, the business of IT, the governance of the IS organization, IS sourcing, project

management, business analytics, and relevant ethical issues.

Given the acceleration of security breaches, readers will find a new chapter on IS security in this sixth edition of

the text. Also, the material on analytics and “big data” has been extensively updated to reflect the growing impor-

tance of the topic. Further, the chapter on work design has been reorganized and extensively revised. Each of the

other chapters has been revised with newer concepts added, discussions of more current topics fleshed out, and old,

outdated topics removed or at least their discussion shortened.

Similar to the fifth edition, every chapter begins with a navigation “box” to help the reader understand the flow

and key topics of the chapter. Further, most chapters continue to have a Social Business Lens or a Geographic Lens

feature. The Social Business Lens feature reflects on an issue related to the chapter’s main topic but is enabled by or

fundamental to using social technologies in the enterprise. The Geographic Lens feature offers a single idea about

a global issue related to the chapter’s main topic.

No text in the field of MIS is completely current. The process of writing the text coupled with the publication

process makes a book somewhat out‐of‐date prior to delivery to its audience. With that in mind, this text is written

Copyright © 2016 John Wiley & Sons, Inc.

http://pearlsonandsaunders.com
http://www.wiley.com/college/pearlson
vi Preface

to summarize the “timeless” elements of using and managing information. Although this text is complete in and

of itself, learning is enhanced by combining the chapters with the most current readings and cases. Faculty are

encouraged to read the news items on the faculty Hub before each class in case one might be relevant to the topic of

the day. Students are encouraged to search the Web for examples related to topics and current events and bring them

into the discussions of the issues at hand. The format of each chapter begins with a navigational guide, a short case

study, and the basic language for a set of important management issues. These are followed by a set of managerial

concerns related to the topic. The chapter concludes with a summary, key terms, a set of discussion questions, and

case studies.

Who should read this book? General managers interested in participating in IS decisions will find this a good

reference resource for the language and concepts of IS. Managers in the IS field will find the book a good resource

for beginning to understand the general manager’s view of how IS affect business decisions. And IS students will

be able to use the book’s readings and concepts as the beginning in their journey to become informed and success-

ful businesspeople.

The information revolution is here. Where do you fit in?

Keri E. Pearlson, Carol S. Saunders, and Dennis F. Galletta

Copyright © 2016 John Wiley & Sons, Inc.

vii

Books of this nature are written only with the support of many individuals. We would like to personally thank

several individuals who helped with this text. Although we ’ ve made every attempt to include everyone who helped

make this book a reality, there is always the possibility of unintentionally leaving some out. We apologize in

advance if that is the case here.

Thank you goes to Dr. William Turner of LeftFour , in Austin, Texas, for help with the infrastructure and

architecture concepts and to Alan Shimel, Editor‐in‐Chief at DevOps.com for initial ideas for the new security

chapter.

We also want to acknowledge and thank pbwiki.com. Without its incredible and free wiki, we would have been

relegated to e‐mailing drafts of chapters back and forth, or saving countless fi les in an external drop box without

any opportunity to include explanations or status messages. For this edition, as with earlier editions, we wanted to

use Web 2.0 tools as we wrote about them. We found that having used the wiki for our previous editions, we were

able to get up and running much faster than if we had to start over without the platform.

We have been blessed with the help of our colleagues in this and in previous editions of the book. They

helped us by writing cases and reviewing the text. Our thanks continue to go out to Jonathan Trower, Espen

Andersen, Janis Gogan, Ashok Rho, Yvonne Lederer Antonucci, E. Jose Proenca, Bruce Rollier, Dave Oliver, Celia

Romm, Ed Watson, D. Guiter, S. Vaught, Kala Saravanamuthu, Ron Murch, John Greenwod, Tom Rohleder, Sam

Lubbe, Thomas Kern, Mark Dekker, Anne Rutkowski, Kathy Hurtt, Kay Nelson, Janice Sipior, Craig Tidwell, and

John Butler. Although we cannot thank them by name, we also greatly appreciate the comments of the anonymous

reviewers who have made a mark on this edition.

The book would not have been started were it not for the initial suggestion of a wonderful editor in 1999 at John

Wiley & Sons, Beth Lang Golub. Her persistence and patience helped shepherd this book through many previous

editions. We also appreciate the help of our current editor, Lise Johnson. Special thanks go to Jane Miller, Gladys

Soto, Loganathan Kandan, and the conscientious JaNoel Lowe who very patiently helped us through the revision

process. We also appreciate the help of all the staff at Wiley who have made this edition a reality.

We would be remiss if we did not also thank Lars Linden for the work he has done on the Pearlson and Saunders

Faculty Hub for this book. Our vision included a Web‐based community for discussing teaching ideas and post-

ing current articles that supplement this text. Lars made that vision into a reality starting with the last edition and

continuing through the present. Thank you, Lars!

From Keri: Thank you to my husband, Yale, and my daughter, Hana, a business and computer science student at

Tulane University. Writing a book like this happens in the white space of our lives—the time in between everything

else going on. This edition came due at a particularly frenetic time, but they listened to ideas, made suggestions, and

celebrated the book ’ s completion with us. I know how lucky I am to have this family. I love you guys!

From Carol: I would like to thank the Dr. Theo and Friedl Schoeller Research Center of Business and Society for

their generous support of my research. Rusty, thank you for being my compass and my release valve. I couldn ’ t do

it without you. Paraphrasing the words of an Alan Jackson song (“Work in Progress”): I may not be what you want

me to be, but I ’ m trying really hard. Just be patient because I ’ m a work in progress. I love you, Kristin, Russell,

and Janel very much!

From Dennis: Thanks to my terrifi c family: my wife Carole, my daughters Christy and Lauren, and my grand-

daughter Gracie. Also thanks to Matt and Jacob, two lovable guys who take wonderful care of my daughters. Finally,

thanks to our parents and sisters ’ families. We are also blessed with a large number of great, caring neighbors whom

we see quite often. I love you all, and you make it all worthwhile!

Acknowledgments

Copyright © 2016 John Wiley & Sons, Inc.

viii

Dr. Keri E. Pearlson is President of KP Partners , an advisory services fi rm working with business leaders on issues

related to the strategic use of information systems (IS) and organizational design. She is an entrepreneur, teacher,

researcher, consultant, and thought leader. Dr. Pearlson has held various positions in academia and industry. She

has been a member of the faculty at the Graduate School of Business at the University of Texas at Austin where she

taught management IS courses to MBAs and executives and at Babson College where she helped design the popular

IS course for the Fast Track MBA program. Dr. Pearlson has held positions at the Harvard Business School, CSC,

nGenera (formerly the Concours Group), AT&T , and Hughes Aircraft Company . While writing this edition, she was

the Research Director for the Analytics Leadership Consortium at the International Institute of Analytics and was

named the Leader of the Year by the national Society of Information Management (SIM) 2014.

Dr. Pearlson is coauthor of Zero Time: Providing Instant Customer Value—Every Time, All the Time (John

Wiley, 2000). Her work has been published in numerous places including Sloan Management Review, Academy

of Management Executive, and Information Resources Management Journal . Many of her case studies have been

published by Harvard Business Publishing and are used all over the world. She currently writes a blog on issues at

the intersection of IT and business strategy. It ’ s available at www.kppartners.com.

Dr. Pearlson holds a Doctorate in Business Administration (DBA) in Management Information Systems from

the Harvard Business School and both a Master ’ s Degree in Industrial Engineering Management and a Bachelor ’ s

Degree in Applied Mathematics from Stanford University.

Dr. Carol S. Saunders is Research Professor at the W. A. Franke College of Business, Northern Arizona

University in Flagstaff, Arizona, and is a Schoeller Senior Fellow at the Friedrich‐Alexander University of

Erlangen‐Nuremberg, Germany. She served as General Conference Chair of the International Conference on

Information Systems (ICIS) in 1999 and as Program Co‐Chair of the Americas Conference of Information

Systems (AMCIS) in 2015. Dr. Saunders was the Chair of the ICIS Executive Committee in 2000. For three

years, she served as Editor‐in‐Chief of MIS Quarterly . She is currently on the editorial boards of Journal

of Strategic Information Systems and Organization Science and serves on the advisory board of Business &

Information Systems Engineering. Dr. Saunders has been recognized for her lifetime achievements by the

Association of Information Systems (AIS) with a LEO award and by the Organizational Communication and

Information Systems Division of the Academy of Management. She is a Fellow of the AIS.

Dr. Saunders ’ current research interests include the impact of IS on power and communication, overload,

virtual teams, time, sourcing, and interorganizational linkages. Her research is published in a number of journals

including MIS Quarterly, Information Systems Research, Journal of MIS, Communications of the ACM, Journal

of Strategic Information Systems, Journal of the AIS, Academy of Management Journal, Academy of Management

Review, Communications Research , and Organization Science .

Dr. Dennis F. Galletta is Professor of Business Administration at the Katz Graduate School of Business,

University of Pittsburgh in Pennsylvania. He is also the Director of the Katz School ’ s doctoral program and has

taught IS Management graduate courses in Harvard ’ s summer program each year since 2009. He obtained his

doctorate from the University of Minnesota in 1985 and is a Certifi ed Public Accountant. Dr. Galletta served as

President of the Association of Information Systems (AIS) in 2007. Like Dr. Saunders, he is both a Fellow of

the AIS and has won a LEO lifetime achievement award. He was a member of the AIS Council for fi ve years.

He also served in leadership roles for the International Conference on Information Systems (ICIS): Program

Co‐Chair in 2005 (Las Vegas) and Conference Co‐Chair in 2011 (Shanghai); as Program Co‐Chair for the

About the Authors

Copyright © 2016 John Wiley & Sons, Inc.

http://www.kppartners.com
ixAbout the Authors

Americas Conference on Information Systems (AMCIS) in 2003 (Tampa, Florida) and Inaugural Conference

Chair in 1995 (Pittsburgh). The Pittsburgh conference had several “firsts” for an IS conference, including the first

on‐line submissions, reviews, conference registration and payment, placement service, and storage of all papers

in advance on a website. Dr. Galletta served as ICIS Treasurer from 1994 to 1998 and Chair of the ICIS Execu-

tive Committee in 2012. He taught IS courses on the Fall 1999 Semester at Sea voyage (Institute for Shipboard

Education) and established the concept of Special Interest Groups in AIS in 2000. In 2014, he won an Emerald

Citation of Excellence for a co‐authored article that reached the top 50 in citations and ratings from the fields of

management, business, and economics.

Dr. Galletta’s current research addresses online and mobile usability and behavioral security issues such as

phishing, protection motivation, and antecedents of security‐related decision making. He has published his research

in journals such as Management Science; MIS Quarterly; Information Systems Research; Journal of MIS; European

Journal of Information Systems; Journal of the AIS; Communications of the ACM; Accounting, Management, and

Information Technologies; Data Base; and Decision Sciences and in proceedings of conferences such as ICIS,

AMCIS, and the Hawaii International Conference on Systems Sciences. Dr. Galletta’s editorship includes working

as current and founding Coeditor in Chief for AIS Transactions on Human‐Computer Interaction and on editorial

boards at journals such as MIS Quarterly, Information Systems Research, Journal of MIS, and Journal of the AIS.

He is currently on the Pre‐eminent Scholars Board of Data Base. He won a Developmental Associate Editor Award

at the MIS Quarterly in 2006. And during the off‐hours, Dr. Galletta’s fervent hobby and obsession is digital pho-

tography, often squinting through his eyepiece to make portrait, macro, Milky Way, and lightning photos when he

should be writing.

Copyright © 2016 John Wiley & Sons, Inc.

x

Contents

Preface iv

Acknowledgments vii

About the Authors viii

Introduction 1

The Case for Participating in Decisions about Information Systems 2

What If a Manager Doesn’t Participate? 5

Skills Needed to Participate Effectively in Information Technology Decisions 6

Basic Assumptions 8

Economics of Information versus Economics of Things 12

Social Business Lens 14

Summary 15

Key Terms 16

1 The Information Systems Strategy Triangle 17

Brief Overview of Business Strategy Frameworks 19

Business Models versus Business Strategy 21

Brief Overview of Organizational Strategies 25

Brief Overview of Information Systems Strategy 26

Social Business Lens: Building a Social Business Strategy 27

Summary 28

Key Terms 29

Discussion Questions 29

Case Study 1‐1 Lego 30

Case Study 1‐2 Google 31

2 Strategic Use of Information Resources 33

Evolution of Information Resources 34

Information Resources as Strategic Tools 36

How Can Information Resources Be Used Strategically? 37

Sustaining Competitive Advantage 43

Social Business Lens: Social Capital 47

Strategic Alliances 47

Risks 49

Geographic Box: Mobile‐Only Internet Users Dominate Emerging Countries 50

Co‐Creating IT and Business Strategy 50

Copyright © 2016 John Wiley & Sons, Inc.

xiContents

Summary 51

Key Terms 51

Discussion Questions 51

Case Study 2‐1 Groupon 52

Case Study 2‐2 Zipcar 53

3 Organizational Strategy and Information Systems 55

Information Systems and Organizational Design 58

Social Business Lens: Social Networks 63

Information Systems and Management Control Systems 63

Information Systems and Culture 66

Geographic Lens: Does National Culture Affect Firm Investment in IS Training? 70

Summary 71

Key Terms 71

Discussion Questions 71

Case Study 3‐1 The Merger of Airtran by Southwest Airlines: Will the Organizational Cultures Merge? 72

Case Study 3‐2 The FBI 73

4 Digital Systems and the Design of Work 75

Work Design Framework 77

How Information Technology Changes the Nature of Work 78

Social Business Lens: Activity Streams 84

Where Work Is Done and Who Does It: Mobile and Virtual Work Arrangements 86

Geographic Lens: How Do People Around the World Feel About Working Remotely? 88

Geographic Lens: Who Telecommutes? A Look at Global Telecommuting Habits 89

Gaining Acceptance for IT‐Induced Change 94

Summary 96

Key Terms 97

Discussion Questions 97

Case Study 4‐1 Trash and Waste Pickup Services, Inc. 97

Case Study 4‐2 Social Networking: How Does IBM Do It? 98

5 Information Systems and Business Transformation 99

Silo Perspective versus Business Process Perspective 100