Since 1990, job and wage research has shown that as the price of computer technology plummets,

CHAPTER 1 The Importance of MIS

“Fired? You’re firing me?”

“Well, fired is a harsh word, but … well, AllRoad has no further need for your services.”

“But, Kelly, I don’t get it. I really don’t. I worked hard, and I did everything you told me to do.”

“Jennifer, that’s just it. You did everything I told you to do.”

“I put in so many hours. How could you fire me?”

“Your job was to find ways to reduce our inventory costs using 3D printing.”

“Right! And I did that.”

“No, you didn’t. You followed up on ideas that I gave you. But we don’t need someone who can follow up on my plans. We need someone who can figure out what we need to do, create her own plans, and bring them back to me … and others.”

“How could you expect me to do that? I’ve only been here 6 months!”

“It’s called teamwork. Sure, you’re just learning our business, but I made sure all of our senior staff would be available to you …”

“I didn’t want to bother them.”

“Well, you succeeded. I asked Drew what he thought of the plans you’re working on. ‘Who’s Jennifer?’ he asked.”

“But doesn’t he work down at the warehouse?”

“Right. He’s the operations manager … and it would seem to be worth talking to him.”

“I’ll go do that!”

“Jennifer, do you see what just happened? I gave you an idea, and you said you’d do it. That’s not what I need. I need you to find solutions on your own.”

“I worked really hard. I put in a lot of hours. I’ve got all these reports written.”

“Has anyone seen them?”

“I talked to you about some of them. But I was waiting until I was satisfied with them.”

“Right. That’s not how we do things here. We develop ideas and then kick them around with each other. Nobody has all the smarts. Our plans get better when we comment and rework them … I think I told you that.”

MyMISLab™

Visit mymislab.com for simulations, tutorials, and end-of-chapter problems.

“Maybe you did. But I’m just not comfortable with that.”

“Well, it’s a key skill here.”

“I know I can do this job.”

“Jennifer, you’ve been here almost 6 months; you have a degree in business. Several weeks ago, I asked you to conceptualize a way to determine the products for 3D printing. When I asked you how you were doing, do you remember what you said?”

“Yes, I wasn’t sure how to proceed. I didn’t want to just throw something out that might not work.”

“But how would you find out if it would work?”

“I don’t want to waste money …”

“No, you don’t. So, when you didn’t get very far with that task, I backed up and asked you to send me a diagram of our supply chain … how we select the vendors, how we negotiate with them, how we order, receive the goods in our inventory, track sales, and reorder, and so on. Not details, just the overview.”

“Yes, I sent you that diagram.”

“Jennifer, it made no sense. Your diagram had us placing goods in inventory before we’d even ordered them.”

“I know that process, I just couldn’t put it down on paper. But I’ll try again!”

“Well, I appreciate that attitude, but we’re a small company—really, still a startup. Everyone needs to pull more than their own weight here. Maybe if we were a bigger company, I’d be able to find for a spot for you, see if we could bring you along. But we can’t afford to do that now.”

“What about my references?”

“I’ll be happy to tell anyone that you’re reliable, that you work 40 to 45 hours a week, and that you’re honest and have integrity.”

“Those are important!”

“Yes, they are. But today, they’re not enough.”

STUDY QUESTIONS

· Q1 Why is Introduction to MIS the most important class in the business school?

· Q2 What is MIS?

· Q3 How can you use the five-component model?

· Q4 Why is the difference between information technology and information systems important?

· Q5 What is information?

· Q6 What are necessary data characteristics?

· Q7 2024?

CHAPTER PREVIEW

“But today, they’re not enough.”

Do you find that statement sobering? And if hard work isn’t enough, what is? We’ll begin this book by discussing the key skills that Jennifer (and you) need and explaining why this course is the single best course in all of the business school for teaching you those key skills.

You may find that last statement surprising. If you are like most students, you have no clear idea of what your MIS class will be about. If someone were to ask you, “What do you study in that class?” you might respond that the class has something to do with computers and maybe computer programming. Beyond that, you might be hard-pressed to say more. You might add, “Well, it has something to do with computers in business,” or maybe, “We are going to learn to solve business problems with computers using spreadsheets and other programs.” So, how could this course be the most important one in the business school?

We begin with that question. After you understand how important this class will be to your career, we will discuss fundamental concepts. We’ll wrap up with some practice on one of the key skills you need to learn.

Q1 Why Is Introduction to MIS the Most Important Class in the Business School?

Introduction to MIS is the most important class in the business school. That statement was not true in 2005, and it may not be true in 2020. But it is true in 2014.

Why?

The ultimate reason lies in a principle known as Moore’s Law . In 1965, Gordon Moore, cofounder of Intel Corporation, stated that because of technology improvements in electronic chip design and manufacturing, “The number of transistors per square inch on an integrated chip doubles every 18 months.” His statement has been commonly misunderstood to be, “The speed of a computer doubles every 18 months,” which is incorrect but captures the sense of his principle.

Because of Moore’s Law, the ratio of price to performance of computers has fallen from something like $4,000 for a standard computing device to a fraction of a penny for that same computing device. 2 See Figure 1-1 .

As a future business professional, however, you needn’t care how fast of a computer your company can buy for $100. That’s not the point. Here’s the point:

Because of Moore’s Law, the cost of data processing, communications, and storage is essentially zero.

2These figures represent the cost of 100,000 transistors, which can roughly be translated into a unit of a computing device. If you doubt any of this, just look at your $199 Kindle Fire and realize that you pay nothing for its wireless access. Geoff Colvin claims the cost of 125,000 transistors is less than the cost of a grain of rice. See: http://chowtimes.com/2010/09/11/food-for-though/food-for-thought/ .

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Figure 1-1 Computer Price/Performance Ratio Decreases

Think about that statement before you hurry to the next paragraph. What happens when those costs are essentially zero? Here are some consequences:

· • YouTube

· • Facebook

· • Pandora

· • LinkedIn

· • Pinterest

· • Woot

· • Twitter

· • Foursquare

None of these companies was prominent in 2005, and, in fact, most didn’t exist in 2005.

What Are Cost-Effective Business Applications of Facebook or Twitter, or Whatever Else Will Soon Appear?

Social networking is the rage. Go to any Web page and you’ll find the Facebook “Like” and the Twitter “Follow” buttons. The question is, are these applications cost-effective? Do they generate revenue worth the time and expense of running them? Someone needs to be examining that question, and that person works in marketing … not in a technical field. We’ll examine this question in more depth in Chapter 8 . For now, think about the first businesses that saw the potential of Facebook and Twitter. They gained a competitive advantage by being ahead of the crowd in adopting these new technologies.

It’s not over. Facebook and Twitter are not the end. Right now, AllRoad Parts and PRIDE (an application you’ll study in Chapters 7 – 12 ) are employing new processing capabilities called the cloud in innovative ways … using technology and techniques that have never been seen before. All of this leads us to the first reason Introduction to MIS is the most important course in the business school today:

Future business professionals need to be able to assess, evaluate, and apply emerging information technology to business.

You need the knowledge of this course to attain that skill.

How Can I Attain Job Security?

Many years ago I had a wise and experienced mentor. One day I asked him about job security, and he told me that the only job security that exists is “a marketable skill and the courage to use it.” He continued, “There is no security in our company, there is no security in any government program, there is no security in your investments, and there is no security in Social Security.” Alas, how right he turned out to be.

So what is a marketable skill? It used to be that one could name particular skills, such as computer programming, tax accounting, or marketing. But today, because of Moore’s Law, because the cost of data processing, storage, and communications is essentially zero, any routine skill can and will be outsourced to the lowest bidder. And if you live in the United States, Canada, Australia, Europe, or another advanced economy, that is unlikely to be you.

Numerous organizations and experts have studied the question of what skills will be marketable during your career. Consider two of them. First, the RAND Corporation, a think tank located in Santa Monica, California, has published innovative and groundbreaking ideas for more than 60 years, including the initial design for the Internet. In 2004, RAND published a description of the skills that workers in the 21st century will need:

· Rapid technological change and increased international competition place the spotlight on the skills and preparation of the workforce, particularly the ability to adapt to changing technology and shifting demand. Shifts in the nature of organizations … favor strong nonroutine cognitive skills. 3

Whether you’re majoring in accounting, marketing, finance, or information systems, you need to develop strong nonroutine cognitive skills.

What are such skills? Robert Reich, former Secretary of Labor, enumerates four:4

· • Abstract reasoning

· • Systems thinking

· • Collaboration

· • Ability to experiment

Figure 1-2 shows an example of each. Reread the AllRoad Parts case that started this chapter, and you’ll see that Jennifer lost her job because of her inability to practice these key skills.

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Figure 1-2 Examples of Critical Skills for Nonroutine Cognition

3Lynn A. Kaoly and Constantijn W. A. Panis, The 21st Century at Work (Santa Monica, CA: RAND Corporation, 2004), p. xiv.

4Robert B. Reich, The Work of Nations (New York: Alfred A. Knopf, 1991), p. 229.

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How Can Intro to MIS Help You Learn Nonroutine Skills?

Introduction to MIS is the best course in the business school for learning these four key skills because every topic will require you to apply and practice them. Here’s how.

Abstract Reasoning

Abstract reasoning is the ability to make and manipulate models. You will work with one or more models in every course topic and book chapter. For example, later in this chapter you will learn about a model of the five components of an information system. This chapter will describe how to use this model to assess the scope of any new information system project; other chapters will build upon this model.

In this course, you will not just manipulate models that your instructor or I have developed, you will also be asked to construct models of your own. In Chapter 5 , for example, you’ll learn how to create data models, and in Chapter 10 you’ll learn to make process models.

Systems Thinking

Can you go down to a grocery store, look at a can of green beans, and connect that can to U.S. immigration policy? Can you watch tractors dig up a forest of pulpwood trees and connect that woody trash to Moore’s Law? Do you know why Cisco Systems is one of the major beneficiaries of YouTube? Answers to all of these questions require systems thinking. Systems thinking is the ability to model the components of the system, to connect the inputs and outputs among those components into a sensible whole that reflects the structure and dynamics of the phenomenon observed.

As you are about to learn, this class is about information systems. We will discuss and illustrate systems; you will be asked to critique systems; you will be asked to compare alternative systems; you will be asked to apply different systems to different situations. All of those tasks will prepare you for systems thinking as a professional.

Collaboration

Collaboration is the activity of two or more people working together to achieve a common goal, result, or work product. Chapter 2 will teach you collaboration skills and illustrate several sample collaboration information systems. Every chapter of this book includes collaboration exercises that you may be assigned in class or as homework.

Here’s a fact that surprises many students: Effective collaboration isn’t about being nice. In fact, surveys indicate the single most important skill for effective collaboration is to give and receive critical feedback. Advance a proposal in business that challenges the cherished program of the VP of marketing, and you’ll quickly learn that effective collaboration skills differ from party manners at the neighborhood barbeque. So, how do you advance your idea in the face of the VP’s resistance? And without losing your job? In this course, you can learn both skills and information systems for such collaboration. Even better, you will have many opportunities to practice them.

Ability to Experiment

“I’ve never done this before.”

“I don’t know how to do it.”

“But will it work?”

“Is it too weird for the market?”

Fear of failure: the fear that paralyzes so many good people and so many good ideas. In the days when business was stable, when new ideas were just different verses of the same song, professionals could allow themselves to be limited by fear of failure.

Let’s take an example of the application of social networking to the oil change business. Is there a legitimate application of social networking there? If so, has anyone ever done it? Is there anyone in the world who can tell you what to do? How to proceed? No. As Reich says, professionals in the 21st century need to be able to experiment.

Successful experimentation is not throwing buckets of money at every crazy idea that enters your head. Instead, experimentation is making a reasoned analysis of an opportunity, envisioning potential solutions, evaluating those possibilities, and developing the most promising ones, consistent with the resources you have.

In this course, you will be asked to use products with which you have no familiarity. Those products might be Microsoft Excel or Access, or they might be features and functions of Blackboard that you’ve not used. Or you may be asked to collaborate using Office 365 or SharePoint or Google Drive. Will your instructor explain and show every feature of those products that you’ll need? You should hope not. You should hope your instructor will leave it up to you to experiment, to envision new possibilities on your own, and to experiment with those possibilities, consistent with the time you have available.

Jobs

Employment is the third factor that makes the Introduction to MIS course vitally important to you. During most of 2013, the U.S. unemployment rate averaged 7.5 percent over all ages and job categories, but according to the U.S. Bureau of Labor Statistics, unemployment of those ages 20 to 24 averaged over 13 percent. 5 Employment was better for college graduates than for those without degrees, but even college grads had a high rate of unemployment. Hope Yen, writing for the Associated Press, said in April 2012 that one in two college graduates is either unemployed or underemployed. 6 But this is not the case in job categories that are related to information systems.

Spence and Hlatshwayo studied employment in the United States from 1990 to 2008. 7 They defined a tradable job as one that was not dependent on a particular location; this distinction is important because such jobs can be outsourced overseas. As shown in Figure 1-3 , Computer Systems Design and Related Services had the strongest growth of any job type in that category. The number of jobs dipped substantially after the dot-com bust in 2000; since 2003, however, job growth has not only recovered, but accelerated dramatically. While this category includes technical positions such as computer programmer and database administrator, it includes nontechnical sales, support, and business management jobs as well. By the way, because Figure 1-3 shows tradable jobs, it puts an end to the myth that all the good computer jobs have gone overseas. According to their data analysis, sourced from the U.S. Bureau of Labor Statistics, that simply has not happened.

However, information systems and computer technology provide job and wage benefits beyond just IS professionals. Acemoglu and Autor published an impressive empirical study of jobs and wages in the United States and parts of Europe from the 1960s to 2010. They found that early in this period, education and industry were the strongest determinants of employment and salary. However, since 1990, the most significant determinant of employment and salary is the nature of work performed. In short, as the price of computer technology plummets, the value of jobs that benefit from it increases dramatically. 8 For example, plentiful, high-paying jobs are available to business professionals who know how to use information systems to improve business process quality, or those who know how to interpret data mining results for improved marketing, or those who know how to use emerging technology like 3D printing to create new products and address new markets. See the Guide on pages 26 – 27 for more thoughts on how you might consider an IS-related job.

5Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” United States Department of Labor, last modified July 5, 2013, http://www.bls.gov/web/empsit/cpseea10.htm .

6 http://news.yahoo.com/1-2-graduates-jobless-underemployed-140300522.html .

7Michael Spence and Sandile Hlatshwayo, The Evolving Structure of the American Economy and the Employment Challenge (New York: Council on Foreign Relations, 2011).

8Daron Acemoglu and David Autor, “Skills, Tasks, and Technologies: Implications for Employment and Earnings” (working paper, National Bureau of Economic Research, June 2010), http://www.nber.org/papers/w16082 .

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Figure 1-3 Growth of Jobs by Sector from 1989 to 2009

What Is the Bottom Line?

The bottom line? This course is the most important course in the business school because:

· 1. It will give you the background you need to assess, evaluate, and apply emerging information systems technology to business.

· 2. It can give you the ultimate in job security—marketable skills—by helping you learn abstraction, systems thinking, collaboration, and experimentation.

· 3. Many MIS-related jobs are available.

With that introduction, let’s get started!

Q2 What Is MIS?

We’ve used the term MIS several times, and you may be wondering exactly what it is. MIS stands for management information systems , which we define as the management and use of information systems that help organizations achieve their strategies. This definition has three key elements: management and use, information systems, and strategies. Let’s consider each, starting first with information systems and their components.

Components of an Information System

A system is a group of components that interact to achieve some purpose. As you might guess, an information system (IS) is a group of components that interact to produce information. That sentence, although true, raises another question: What are these components that interact to produce information?

Figure 1-4 shows the five-component framework —a model of the components of an information system: computer hardware , software , data , procedures , and people . These five components are present in every information system, from the simplest to the most complex. For example, when you use a computer to write a class report, you are using hardware (the computer, storage disk, keyboard, and monitor), software (Word, WordPerfect, or some other word-processing program), data (the words, sentences, and paragraphs in your report), procedures (the methods you use to start the program, enter your report, print it, and save and back up your file), and people (you).

Consider a more complex example, say an airline reservation system. It, too, consists of these five components, even though each one is far more complicated. The hardware consists of dozens or more computers linked together by data communications hardware. Hundreds of different programs coordinate communications among the computers, and still other programs perform the reservations and related services. Additionally, the system must store millions upon millions of characters of data about flights, customers, reservations, and other facts. Hundreds of different procedures are followed by airline personnel, travel agents, and customers. Finally, the information system includes people, not only the users of the system, but also those who operate and service the computers, those who maintain the data, and those who support the networks of computers.

The important point here is that the five components in Figure 1-4 are common to all information systems, from the smallest to the largest. As you think about any information system, including a new one like social networking, learn to look for these five components. Realize, too, that an information system is not just a computer and a program, but rather an assembly of computers, programs, data, procedures, and people.

As we will discuss later in this chapter, these five components also mean that many different skills are required besides those of hardware technicians or computer programmers when building or using an information system. See the Guide starting on page 26 for more.

Before we move forward, note that we have defined an information system to include a computer. Some people would say that such a system is a computer-based information system . They would note that there are information systems that do not include computers, such as a calendar hanging on the wall outside of a conference room that is used to schedule the room’s use. Such systems have been used by businesses for centuries. Although this point is true, in this book we focus on computer-based information systems. To simplify and shorten the book, we will use the term information system as a synonym for computer-based information system.

Management and Use of Information Systems

The next element in our definition of MIS is the management and use of information systems. Here we define management to mean develop, maintain, and adapt. Information systems do not pop up like mushrooms after a hard rain; they must be developed. They must also be maintained, and because business is dynamic, they must be adapted to new requirements.

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Figure 1-4 Five Components of an Information System

You may be saying, “Wait a minute, I’m a finance (or accounting or management) major, not an information systems major. I don’t need to know how to manage information systems.” If you are saying that, you are like a lamb headed for shearing. Throughout your career, in whatever field you choose, information systems will be built for your use, and sometimes under your direction. To create an information system that meets your needs, you need to take an active role in that system’s development. Even if you are not a programmer or a database designer or some other IS professional, you must take an active role in specifying the system’s requirements and in managing the system’s development project. Without active involvement on your part, it will only be good luck that causes the new system to meet your needs.

As a business professional, you are the person who understands business needs and requirements. If you want to apply social networking to your products, you are the one who knows how best to obtain customer responses. The technical people who build networks, the database designers who create the database, the IT people who configure the computers—none of these people know what is needed and whether the system you have is sufficient or whether it needs to be adapted to new requirements. You do!

In addition to management tasks, you will also have important roles to play in the use of information systems. Of course, you will need to learn how to employ the system to accomplish your job tasks. But you will also have important ancillary functions as well. For example, when using an information system, you will have responsibilities for protecting the security of the system and its data. You may also have tasks for backing up data. When the system fails (most do, at some point), you will have tasks to perform while the system is down as well as tasks to accomplish to help recover the system correctly and quickly.

Security is critically important when using information systems today. You’ll learn much more about it in Chapter 12 . But you need to know about strong passwords and their use now, before you get to that chapter. Read and follow the Security Guide on pages 24 – 25 .

Achieving Strategies

The last part of the definition of MIS is that information systems exist to help organizations achieve their strategies. First, realize that this statement hides an important fact: Organizations themselves do not “do” anything. An organization is not alive, and it cannot act. It is the people within a business who sell, buy, design, produce, finance, market, account, and manage. So, information systems exist to help people who work in an organization to achieve the strategies of that business.

Information systems are not created for the sheer joy of exploring technology. They are not created so the company can be “modern” or so the company can show it has a social networking presence on the Web. They are not created because the information systems department thinks it needs to be created or because the company is “falling behind the technology curve.”

This point may seem so obvious that you might wonder why we mention it. Every day, however, some business somewhere is developing an information system for the wrong reasons. Right now, somewhere in the world, a company is deciding to create a Facebook presence for the sole reason that “every other business has one.” This company is not asking questions such as:

· • “What is the purpose of our Facebook page?”

· • “What is it going to do for us?”

· • “What is our policy for employees’ contributions?”

· • “What should we do about critical customer reviews?”

· • “Are the costs of maintaining the page sufficiently offset by the benefits?”

For more information on how an understanding of MIS can broaden your career options, see the Guide on pages 26 – 27 .

But that company should ask those questions! Chapter 3 addresses the relationship between information systems and strategy in more depth. Chapter 8 addresses social media and strategy specifically.

Again, MIS is the development and use of information systems that help businesses achieve their strategies. Already you should be realizing that there is much more to this class than buying a computer, working with a spreadsheet, or creating a Web page.

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Q3 How Can You Use the Five-Component Model?

The five-component model in Figure 1-4 can help guide your learning and thinking about IS, both now and in the future. To understand this framework better, first note in Figure 1-5 that these five components are symmetric. The outermost components, hardware and people, are both actors; they can take actions. The software and procedure components are both sets of instructions: Software is instructions for hardware, and procedures are instructions for people. Finally, data is the bridge between the computer side on the left and the human side on the right.

Now, when we automate a business task, we take work that people are doing by following procedures and move it so that computers will do that work, following instructions in software. Thus, the process of automation is a process of moving work from the right side of Figure 1-5 to the left.

The Most Important Component—YOU

You are part of every information system that you use. When you consider the five components of an information system, the last component, people, includes you. Your mind and your thinking are not merely a component of the information systems you use; they are the most important component.

As you will learn later in this chapter, computer hardware and programs manipulate data, but no matter how much data they manipulate, it is still just data. It is only humans that produce information. When you take a set of data, say a list of customer responses to a marketing campaign, that list, no matter if it was produced using 10,000 servers and Hadoop ( Chapter 9 ), is still just data. It does not become information until you or some other human take it into your mind and are informed by it.

Even if you have the largest computer farm ( Chapter 4 ) in the world, and even if you are processing that data with the most sophisticated programs, if you do not know what to do with the data those programs produce, you are wasting your time and money. The quality of your thinking is what determines the quality of the information that is produced.

Substantial cognitive research has shown that although you cannot increase your basic IQ, you can dramatically increase the quality of your thinking. That is one reason we have emphasized the need for you to use and develop your abstract reasoning. The effectiveness of an IS depends on the abstract reasoning of the people who use it.

All Components Must Work

Information systems often encounter problems—despite our best efforts, they don’t work right. And in these situations, blame is frequently placed on the wrong component. You will often hear people complain that the computer doesn’t work, and certainly hardware or software is sometimes at fault. But with the five-component model, you can be more specific, and you have more suspects to interrogate. Sometimes the data is not in the right format, and in many cases, the procedures are not clear and the people using the system are not properly trained. By using the five-component model, you can better locate the cause of a problem and create effective solutions.

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Figure 1-5 Characteristics of the Five Components

High-Tech Versus Low-Tech Information Systems

Information systems differ in the amount of work that is moved from the human side (people and procedures) to the computer side (hardware and programs). For example, consider two different versions of a customer support information system: A system that consists only of a file of email addresses and an email program is a very low-tech system. Only a small amount of work has been moved from the human side to the computer side. Considerable human work is required to determine when to send which emails to which customers.

In contrast, a customer support system that keeps track of the equipment that customers have and the maintenance schedules for that equipment and then automatically generates email reminders to customers is a higher-tech system. This simply means that more work has been moved from the human side to the computer side. The computer is providing more services on behalf of the humans.

Often, when considering different information systems alternatives, it will be helpful to consider the low-tech versus high-tech alternatives in light of the amount of work that is being moved from people to computers.

Understanding the Scope of New Information Systems

The five-component framework can also be used when assessing the scope of new systems. When in the future some vendor pitches the need for a new technology to you, use the five components to assess how big of an investment that new technology represents. What new hardware will you need? What programs will you need to license? What databases and other data must you create? What procedures will need to be developed for both use and administration of the information system? And, finally, what will be the impact of the new technology on people? Which jobs will change? Who will need training? How will the new technology affect morale? Will you need to hire new people? Will you need to reorganize?

The Ethics Guide in each chapter of this book considers the ethics of information systems use. These guides challenge you to think deeply about ethical standards, and they provide for some interesting discussions with classmates. The Ethics Guide on pages 20 – 21 considers the ethics of using data that deceives the viewer.

Components Ordered by Difficulty and Disruption

Finally, as you consider the five components, keep in mind that Figure 1-5 shows them in order of ease of change and the amount of organizational disruption. It is a simple matter to order additional hardware. Obtaining or developing new programs is more difficult. Creating new databases or changing the structure of existing databases is still more difficult. Changing procedures, requiring people to work in new ways, is even more difficult. Finally, changing personnel responsibilities and reporting relationships and hiring and terminating employees are all very difficult and very disruptive to the organization.

Q4 Why Is the Difference Between Information Technology and Information Systems Important?

Information technology and information systems are two closely related terms, but they are different. Information technology (IT) refers to the products, methods, inventions, and standards that are used for the purpose of producing information. IT pertains to the hardware, software, and data components. In contrast, an information system (IS) is an assembly of hardware, software, data, procedures, and people that produces information.

Information technology drives the development of new information systems. Advances in information technology have taken the organizations from the days of punched cards to e-commerce and social media, and such advances will continue to take the industry to the next stages and beyond.

Why does this difference matter to you? Knowing the difference between IT and IS can help you avoid a common mistake: You cannot buy an IS.

You can buy IT; you can buy or lease hardware, you can license programs and databases, and you can even obtain predesigned procedures. Ultimately, however, it is your people who execute those procedures to employ that new IT.

For any new system, you will always have training tasks (and costs), you will always have the need to overcome employees’ resistance to change, and you will always need to manage the employees as they use the new system. Hence, you can buy IT, but you cannot buy IS.

Consider a simple example. Suppose your organization decides to develop a Facebook page. Facebook provides the hardware and programs, the database structures, and standard procedures. You, however, provide the data to fill your portion of its database, and you must extend its standard procedures with your own procedures for keeping that data current. Those procedures need to provide, for example, a means to review your page’s content regularly and a means to remove content that is judged inappropriate. Furthermore, you need to train employees on how to follow those procedures and manage those employees to ensure that they do.

Managing your own Facebook page is as simple an IS as exists. Larger, more comprehensive IS that involve many, even dozens, of departments and thousands of employees require considerable work. Again, you can buy IT, but you can never buy an IS!

Q5 What Is Information?

Based on our earlier discussions, we can now define an information system as an assembly of hardware, software, data, procedures, and people that interact to produce information. The only term left undefined in that definition is information, and we turn to it next.

Definitions Vary

Information is one of those fundamental terms that we use every day but that turns out to be surprisingly difficult to define. Defining information is like defining words such as alive and truth. We know what those words mean, we use them with each other without confusion, but nonetheless, they are difficult to define.

In this text, we will avoid the technical issues of defining information and will use common, intuitive definitions instead. Probably the most common definition is that information is knowledge derived from data, whereas data is defined as recorded facts or figures. Thus, the facts that employee James Smith earns $70.00 per hour and that Mary Jones earns $50.00 per hour are data. The statement that the average hourly wage of all the graphic designers is $60.00 per hour is information. Average wage is knowledge that is derived from the data of individual wages.

Another common definition is that information is data presented in a meaningful context. The fact that Jeff Parks earns $30.00 per hour is data. 9 The statement that Jeff Parks earns less than half the average hourly wage of AllRoad’s Web designers, however, is information. It is data presented in a meaningful context.

9Actually, the word data is plural; to be correct, we should use the singular form datum and say, “The fact that Jeff Parks earns $30 per hour is a datum.” The word datum however, sounds pedantic and fussy, and we will avoid it in this text.

Another definition of information that you will hear is that information is processed data, or sometimes, information is data processed by summing, ordering, averaging, grouping, comparing, or other similar operations. The fundamental idea of this definition is that we do something to data to produce information.

There is yet a fourth definition of information, which was set out by the great research psychologist Gregory Bateson. He defined information as a difference that makes a difference.

For the purposes of this text, any of these definitions of information will do. Choose the definition of information that makes sense to you. The important point is that you discriminate between data and information. You also may find that different definitions work better in different situations.

Where Is Information?

Suppose you create a graph of Amazon.com’s stock price and net income over its history, like that shown in Figure 1-6 . Does that graph contain information? Well, if it shows a difference that makes a difference or if it presents data in a meaningful context, then it fits two of the definitions of information, and it’s tempting to say that the graph contains information.

However, show that graph to your family dog. Does your dog find information in that graph? Well, nothing about Amazon.com , anyway. The dog might learn what you had for lunch, but it won’t obtain any information about Amazon.com’s stock price over time.

Reflect on this experiment and you will realize that the graph is not, itself, information. The graph is data that you and other humans perceive, and from that perception you conceive information. In short, if it’s on a piece of paper or on a digital screen, it’s data. If it’s in the mind of a human, it’s information.

Why, you’re asking yourself, do I care? Well, for one, it further explains why you, as a human, are the most important part of any information system you use. The quality of your thinking, of your ability to conceive information from data, is determined by your cognitive skills. The data is the data, the information you conceive from it is the value that you add to the information system.

Furthermore, people have different perceptions and points of view. Not surprisingly, then, they will conceive different information from the same data. You cannot say to someone, “Look, it’s right there in front of you, in the data,” because it’s not right there in the data. Rather, it’s in your head, and in their heads, and your job is to explain what you have conceived so that others can understand it.

Finally, once you understand this, you’ll understand that all kinds of common sentences make no sense. “I sent you that information,” cannot be true. “I sent you the data, from which you conceived the information,” is the most we can say. During your business career, this observation will save you untold frustration if you remember to apply it.

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Figure 1-6 Amazon.com Stock Price and Net Income

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Q6 What Are Necessary Data Characteristics?

You have just learned that humans conceive information from data. As stated, the quality of the information that you can create depends, in part, on your thinking skills. It also depends, however, on the quality of the data that you are given. Figure 1-7 summarizes critical data characteristics.

Accurate

First, good information is conceived from accurate, correct, and complete data, and it has been processed correctly as expected. Accuracy is crucial; business professionals must be able to rely on the results of their information systems. The IS function can develop a bad reputation in the organization if a system is known to produce inaccurate data. In such a case, the information system becomes a waste of time and money as users develop work-arounds to avoid the inaccurate data.

A corollary to this discussion is that you, a future user of information systems, ought not to rely on data just because it appears in the context of a Web page, a well-formatted report, or a fancy query. It is sometimes hard to be skeptical of data delivered with beautiful, active graphics. Do not be misled. When you begin to use a new information system, be skeptical. Cross-check the data you are receiving. After weeks or months of using a system, you may relax. Begin, however, with skepticism. Again, you cannot conceive accurate information from inaccurate data.

Timely

Good information requires that data be timely—available in time for its intended use. A monthly report that arrives six weeks late is most likely useless. The data arrives long after the decisions have been made that needed your information. An information system that sends you a poor customer credit report after you have shipped the goods is unhelpful and frustrating. Notice that timeliness can be measured against a calendar (6 weeks late) or against events (before we ship).

When you participate in the development of an IS, timeliness will be part of the requirements you specify. You need to give appropriate and realistic timeliness needs. In some cases, developing systems that provide data in near real time is much more difficult and expensive than producing data a few hours later. If you can get by with data that is a few hours old, say so during the requirements specification phase.

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Figure 1-7 Data Characteristics Required for Good Information

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Consider an example. Suppose you work in marketing and you need to be able to assess the effectiveness of new online ad programs. You want an information system that not only will deliver ads over the Web, but that also will enable you to determine how frequently customers click on those ads. Determining click ratios in near real time will be very expensive; saving the data in a batch and processing it some hours later will be much easier and cheaper. If you can live with data that is a day or two old, the system will be easier and cheaper to implement.

Relevant

Data should be relevant both to the context and to the subject. Considering context, you, the CEO, need data that is summarized to an appropriate level for your job. A list of the hourly wage of every employee in the company is unlikely to be useful. More likely, you need average wage information by department or division. A list of all employee wages is irrelevant in your context.

Data should also be relevant to the subject at hand. If you want data about short-term interest rates for a possible line of credit, then a report that shows 15-year mortgage interest rates is irrelevant. Similarly, a report that buries the data you need in pages and pages of results is also irrelevant to your purposes.

Just Barely Sufficient

Data needs to be sufficient for the purpose for which it is generated, but just barely so. We are inundated with data; one of the critical decisions that each of us has to make each day is what data to ignore. The higher you rise into management, the more data you will be given, and because there is only so much time, the more data you will need to ignore. So, data should be sufficient, but just barely.

Worth Its Cost

Data is not free. There are costs for developing an information system, costs of operating and maintaining that system, and costs of your time and salary for reading and processing the data the system produces. For data to be worth its cost, an appropriate relationship must exist between the cost of data and its value.

Consider an example. What is the value of a daily report of the names of the occupants of a full graveyard? Zero, unless grave robbery is a problem for the cemetery. The report is not worth the time required to read it. It is easy to see the importance of economics for this silly example. It will be more difficult, however, when someone proposes new technology to you. You need to be ready to ask, “What’s the value of the information that I can conceive from this data?” “What is the cost?” “Is there an appropriate relationship between value and cost?” Information systems should be subject to the same financial analyses to which other assets are subjected.

Ethics Guide: ETHICS AND PROFESSIONAL RESPONSIBILITY

Suppose you’re a young marketing professional who has just taken a new promotional campaign to market. The executive committee asks you to present a summary of the sales effect of the campaign, and you produce the graph shown in Figure 1 . As shown, your campaign was just in the nick of time; sales were starting to fall the moment your campaign kicked in. After that, sales boomed.

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Figure 1

But note the vertical axis has no quantitative labels. If you add quantities, as shown in Figure 2 , the performance is less impressive. It appears that the substantial growth amounts to less than 20 units. Still the curve of the graph is impressive, and if no one does the arithmetic, your campaign will appear successful.

This impressive shape is only possible, however, because Figure 2 is not drawn to scale. If you draw it to scale, as shown in Figure 3 , your campaign’s success is, well, problematic, at least for you.

Which of these graphs do you present to the committee?

Each chapter of this text includes an Ethics Guide that explores ethical and responsible behavior in a variety of MIS-related contexts. In this chapter, we’ll examine the ethics of data and information.

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Figure 2

Centuries of philosophical thought have addressed the question “What is right behavior?” and we can’t begin to discuss all of it here. You will learn much of it, however, in your business ethics class. For our purposes, we’ll use two of the major pillars in the philosophy of ethics. We introduce the first one here and the second in Chapter 2 .

The German philosopher Immanuel Kant defined the categorical imperative as the principle that one should behave only in a way that one would want the behavior to be a universal law. Stealing is not such behavior because if everyone steals, nothing can be owned. Stealing cannot be a universal law. Similarly, lying cannot be consistent with the categorical imperative because if everyone lies, words are useless.

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Figure 3

When you ask whether a behavior is consistent with this principle, a good litmus test is “Are you willing to publish your behavior to the world? Are you willing to put it on your Facebook page? Are you willing to say what you’ve done to all the players involved?” If not, your behavior is not ethical, at least not in the sense of Kant’s categorical imperative.

Kant defined duty as the necessity to act in accordance with the categorical imperative. Perfect duty is behavior that must always be met. Not lying is a perfect duty. Imperfect duty is action that is praiseworthy, but not required according to the categorical imperative. Giving to charity is an example of an imperfect duty.

Kant used the example of cultivating one’s own talent as an imperfect duty, and we can use that example as a way of defining professional responsibility. Business professionals have an imperfect duty to obtain the skills necessary to accomplish their jobs. We also have an imperfect duty to continue to develop our business skills and abilities throughout our careers.

We will apply these principles in the chapters that follow. For now, use them to assess your beliefs about Figures 1–3 by answering the following questions.

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Source: .shock/Fotolia

 DISCUSSION QUESTIONS

· 1. Restate Kant’s categorical imperative using your own words. Explain why cheating on exams is not consistent with the categorical imperative.

· 2. While there is some difference of opinion, most scholars believe that the Golden Rule (“Do unto others as you would have them do unto you.”) is not equivalent to Kant’s categorical imperative. Justify this belief.

· 3. Using the Bateson definition (discussed in Q5) that information is a difference that makes a difference:

· a. Explain how the features of the graph in Figure 1 influence the viewer to create information.

· b. Explain how the features of the graph in Figure 3 influence the viewer to create information.

· c. Which of these graphs is consistent with Kant’s categorical imperative?

· 4. Suppose you created Figure 1 using Microsoft Excel. To do so, you keyed the data into Excel and clicked the Make Graph button (there is one, though it’s not called that.) Voila, Excel created Figure 1 without any labels and drawn out of scale as shown. Without further consideration, you put the result into your presentation.

· a. Is your behavior consistent with Kant’s categorical imperative? Why or why not?

· b. If Excel automatically produces graphs like Figure 1 , is Microsoft’s behavior consistent with Kant’s categorical imperative? Why or why not?

· 5. Change roles. Assume now you are a member of the executive committee. A junior marketing professional presents Figure 1 to the committee, and you object to the lack of labels and the scale. In response, the junior marketing professional says, “Sorry, I didn’t know. I just put the data into Excel and copied the resulting graph.” What conclusions do you, as an executive, make about the junior marketing professional in response to this statement?

· 6. Is the junior marketing person’s response in question 5 a violation of a perfect duty? Of any imperfect duty? Of any duty? Explain your response.

· 7. As the junior marketing professional, which graph do you present to the committee?

· 8. According to Kant, lying is not consistent with the categorical imperative. Suppose you are invited to a seasonal barbeque at the department chair’s house. You are served a steak that is tough, overcooked, and so barely edible that you secretly feed it to the department chair’s dog (who appears to enjoy it). The chairperson asks you, “How is your steak?” and you respond, “Excellent, thank you.”

· a. Is your behavior consistent with Kant’s categorical imperative?

· b. The steak seemed to be excellent to the dog. Does that fact change your answer to a?

· c. What conclusions do you draw from this example?

Q7 2024?

In Q1, we said that future businesspeople need to be able to assess, evaluate, and apply emerging technology. What technology might that be? And how might it pertain to future business?

Let’s take a guess at technology in the year 2024. Of course, we won’t have perfect insight and, in fact, these guesses will probably seem ludicrous to the person who finds this book for sale for a dollar at a Goodwill store in 2024. But let’s exercise our minds in that direction.

One near certainty is that most computers won’t look like computers. Apple’s iPad, for example, does not look like a traditional desktop or laptop, but you can use it to watch videos, listen to music, read books, store photos, surf the Internet, and network online. You can also buy apps for the iPad that are educational, such as ones designed to aid toddlers in learning their ABCs and others focused on helping high school students learn the periodic table.

Amazon.com ’s Kindle Fire, which is advertised as a media device, is a computer. It just doesn’t look like one. What happens when you turn on that Kindle? You are connected, magically as it were, to the Amazon.com store. You can buy books and magazine subscriptions, and so on, with a single click.

Furthermore, everyday items now have computers in them. Tanita offers a scale that sends an electrical pulse through your body and then provides not only your weight, but also your body fat, bone mass, metabolism, and level of hydration. You can wear a watch that counts the calories you have burned and the number of miles you have walked or run and reports them back to a Web site. You could link this data with your doctor’s office so that your physician could actually prescribe exercise, just like drugs. In fact, you’ll see a prototype of this very application in Chapters 7 – 12 !

We can expect that televisions and autos and parking meters will all be computers, or at least have a computer inside. We can further imagine some middle-aged, overweight man sitting at a Pizza Hut when the 911 staff arrives to carry him away.

“Why are you here?” he’ll say, “I’m fine.”

“Oh, no you’re not. Your pacemaker called us because you’re having a heart attack.”

By 2024, it’s likely that desktop and portable computers as we know them today will have disappeared. They’ll be replaced by mobile devices of many different types. Your employer might not even provide you a computer; you may be expected to bring your own computing device to work, or maybe all workplaces will have computing devices that you make personal by signing in. We explore these possibilities further in Chapter 4 .

But let’s apply systems thinking to the social implications of these changes. If everyone in the world is wearing Google Glasses or something similar by 2024, would the Boston Marathon bomber be caught in minutes? Doing so would require not just the image data, but also huge networks of computers to process the image data in real time. And, if so, what does that mean for privacy? And where are the business opportunities in all of that? 10

10Anton Wahlman, “Could Google Glass Catch the Boston Bomber?” TheStreet, last updated April 18, 2013, http://money.msn.com/technology-investment/post.aspx?post=f0d8f47e-1d83-4c0b-a9f1-c6bbf250fc3c .

Will people still go to work? Why? Yahoo! CEO Marissa Mayer required her employees to come to work and earned the disdain of many. Is she on the wrong side of that trend? She says important work gets done in informal meetings around the coffee pot, but will this matter when meeting at the coffee pot is a virtual experience? And what about organizations? What will we need organizations for? Will employees—at least talented, symbolic workers like you will be—need organizations? Or will they band together in temporary teams, work together, and then band together in another way?

Bring this closer to home. What about classrooms?

Why go to class if you have a classroom in a box? Let’s phrase this differently because the traditional classroom does have value, especially to those students who learn from comments and questions asked by more able students. 11 Put it this way: Suppose you can go to a traditional classroom for $25,000 a year or go to the classroom in a box for $3,500 per year. Either way, you earn a degree; maybe the box’s degree is not as prestigious, but it is an accredited degree. Which would you choose?

We’ll take a 2024 look at the end of each chapter. For now, think about it: Who are the winners and the losers in the products-that-compute era?

11Louise Nemanich, Michael Banks, and Dusya Vera, “Enhancing Knowledge Transfer in Classroom Versus OnLine Settings: The Interplay Among Instructor, Student, and Context,” Decision Sciences Journal of Innovative Education 7, no. 1 (2009): 140.

Security Guide: PASSWORDS AND PASSWORD ETIQUETTE

All forms of computer security involve passwords. Most likely, you have a university account that you access with a user name and password. When you set up that account, you were probably advised to use a “ strong password .” That’s good advice, but what is a strong password? Probably not “sesame,” but what then? Microsoft, a company that has many reasons to promote effective security, provides a definition that is commonly used. Microsoft defines a strong password as one with the following characteristics:

· • Has at least 10 characters; 12 is even better

· • Does not contain your user name, real name, or company name

· • Does not contain a complete dictionary word, in any language

· • Is different from previous passwords you have used

· • Contains both upper- and lowercase letters, numbers, and special characters (such as ~ ! @; # $ % ^ &; * ( ) _ +; - =; { } | [ ] \ : “ ; ‘ <; >;? , ./)

Examples of good passwords are:

· • Qw37^T1bb?at

· • 3B47qq<3>5!7b

The problem with such passwords is that they are nearly impossible to remember. And the last thing you want to do is write your password on a piece of paper and keep it near the device where you use it. Never do that!

One technique for creating memorable, strong passwords is to base them on the first letter of the words in a phrase. The phrase could be the title of a song or the first line of a poem or one based on some fact about your life. For example, you might take the phrase, “I was born in Rome, New York, before 2000.” Using the first letters from that phrase and substituting the character < for the word before, you create the password IwbiR,NY<2000. That’s an acceptable password, but it would be better if all of the numbers were not placed on the end. So, you might try the phrase, “I was born at 3:00 AM in Rome, New York.” That phrase yields the password Iwba3:00AMiR,NY which is a strong password that is easily remembered.

Once you have created a strong password, you need to protect it with proper behavior. Proper password etiquette is one of the marks of a business professional. Never write down your password, and do not share it with others. Never ask someone else for his password, and never give your password to someone else.

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Source: © iQoncept/Fotolia

But what if you need someone else’s password? Suppose, for example, you ask someone to help you with a problem on your computer. You sign on to an information system, and for some reason, you need to enter that other person’s password. In this case, say to the other person, “We need your password,” and then get out of your chair, offer your keyboard to the other person, and look away while she enters the password. Among professionals working in organizations that take security seriously, this little “do-sido” move—one person getting out of the way so another person can enter her password—is common and accepted.

If someone asks for your password, do not give it out. Instead, get up, go over to that person’s machine, and enter your own password, yourself. Stay present while your password is in use, and ensure that your account is logged out at the end of the activity. No one should mind or be offended in any way when you do this. It is the mark of a professional.

 DISCUSSION QUESTIONS

· 1. Here are the first two lines of a famous poem by T. S. Eliot, “Let us go then, you and I, When the evening is spread out against the sky.” Explain how to use these lines to create a password. How could you add numbers and special characters to the password in a way that you will be able to remember?

· 2. List two different phrases that you can use to create a strong password. Show the password created by each.

· 3. One of the problems of life in the cyberworld is that we all are required to have multiple passwords—one for work or school, one for bank accounts, another for eBay or other auction sites, and so forth. Of course, it is better to use different passwords for each. But in that case you have to remember three or four different passwords. Think of different phrases you can use to create a memorable, strong password for each of these different accounts. Relate the phrase to the purpose of the account. Show the passwords for each.

· 4. Explain proper behavior when you are using your computer and you need to enter, for some valid reason, another person’s password.

· 5. Explain proper behavior when someone else is using her computer and that person needs to enter, for some valid reason, your password.

Guide: FIVE-COMPONENT CAREERS

Some years, even some decades, students can wait until their last semester to think seriously about jobs. They can pick a major, take the required classes, and prepare to graduate, all the while assuming that job recruiters will be on campus, loaded with good jobs, sometime during their senior year. Alas, today is not one of those periods.

In the current employment situation, you need to be proactive and aggressive in your job search. Think about it: you will be spending one-third of your waking life in your job. One of the best things you can do for yourself is to begin to think seriously about your career prospects now. You don’t want to find yourself working as a barista after four years of business school, unless, of course, you’re planning on starting the next Starbucks.

So, start here. Are you interested in a career in MIS? At this point, you don’t know enough to know, but Figure 1-3 should catch your attention. With job growth like that, in a category of jobs that is net of outsourcing, you should at least ponder whether there is a career for you in IS and related services.

But what does that mean? If you go to the U.S. Bureau of Labor Statistics, you can find that there are more than a million computer programmers in the United States today, and more than 600,000 systems analysts. You probably have some notion of what a programmer does, but you don’t yet know what a systems analyst is. Examine the five components in Figure 1-4 , however, and you can glean some idea. Programmers work primarily with the software component, while systems analysts work with the entire system, with all five components. So, as a systems analyst, you work with system users to determine what the organizational requirements are and then with technical people (and others) to help develop that system. You work as a cultural broker: translating the culture of technology into the culture of business, and the reverse.

Fortunately for you, many interesting jobs are not captured by the bureau’s data. Why fortunate? Because you can use what you’re learning in this course to identify and obtain jobs that other students may not think about, or even know about. If so, you’ve gained a competitive advantage.

The chart on the next page provides a framework for thinking about careers in an unconventional way. As you can see, there are technical jobs in MIS, but fascinating, challenging, high-paying, nontechnical ones as well. Consider, for example, professional sales. Suppose you have the job of selling enterprise-class software to the Mayo Clinic. You will sell to intelligent, highly motivated professionals, with tens of millions of dollars to spend. Or suppose you work for the Mayo Clinic, on the receiving end of that sales pitch. How will you spend your tens of millions? You will need knowledge of your business, and you will also need to understand enough technology to ask intelligent questions, and interpret the responses.

Give this some thought by answering the boxed questions, even if they aren’t assigned for a grade!

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ACTIVE REVIEW

Use this Active Review to verify that you understand the ideas and concepts that answer the chapter’s study questions.

Q1 Why is Introduction to MIS the most important class in the business school?

Define Moore’s Law and explain why its consequences are important to business professionals today. State how business professionals should relate to emerging information technology. Give the text’s definition of job security and use Reich’s list to explain how this course will help you attain that security. Summarize IS-related job opportunities.

Q2 What is MIS?

Identify the three important phrases in the definition of MIS. Name the five components of an information system. Explain why end users need to be involved in the management of information systems. Explain why it is a misconception to say that organizations do something.

Q3 How can you use the five-component model?

Name and define each of the five components. Explain the symmetry in the five-component model. Show how automation moves work from one side of the five-component structure to the other. Name the most important component and state why it is the most important. Use the five-component model to describe the differences between high-tech and low-tech information systems. Explain how the components are ordered according to difficulty of change and disruption.

Q4 Why is the difference between information technology and information systems important?

Using the five-component model, explain the difference between IT and IS. Explain why you can buy IT, but you can never buy IS. What does that mean to you, as a potential future business manager?

Q5 What is information?

State four different definitions of information. Identify the one that is your favorite and explain why. State the difference between data and information. Explain why information can never be written on a piece of paper or shown on a display device.

Q6 What are necessary data characteristics?

Create a mnemonic device for remembering the characteristics of good data. Explain how these data characteristics relate to information quality.

Q7 2024?

What trends do you expect to see in 2024? Explain the term classrooms-in-a-box. Why is your college or university challenged by classrooms-in-a-box? Is it seriously challenged, or is this just a passing fad? If your school is publicly funded, is it more at risk? Summarize how answering these questions contributes to your skill as a nonroutine thinker.

Using Your Knowledge with AllRoad Parts

Reread the AllRoad Parts vignette at the start of this chapter. Using the knowledge you’ve gained from this chapter, especially that in Q1, identify five mistakes that Jennifer made. For each, explain what you would do differently. Be specific.

KEY TERMS AND CONCEPTS

3D printing (additive manufacturing) 8

Abstract reasoning 8

Collaboration 8

Computer hardware   11

Computer-based information system 11

Data 11

Experimentation 9

Five-component framework 11

Information 16

Information system (IS) 11

Information technology (IT) 15

Management information systems (MIS) 10

Moore’s Law 5

People 11

Procedures 11

Software 11

Strong password 24

System 11

Systems thinking 8

My MIS Lab

Go to mymislab.com to complete the problems marked with this icon .

USING YOUR KNOWLEDGE

· 1-1. One of life’s greatest gifts is to be employed doing work that you love. Reflect for a moment on a job that you would find so exciting that you could hardly wait to get to sleep on Sunday night so that you could wake up and go to work on Monday.

· a. Describe that job. Name the industry, the type of company or organization for whom you’d like to work, the products and services they produce, and your specific job duties.

· b. Explain what it is about that job that you find so compelling.

· c. In what ways will the skills of abstraction, systems thinking, collaboration, and experimentation facilitate your success in that job?

· d. Given your answers to parts a through c, define three to five personal goals for this class. None of these goals should include anything about your GPA. Be as specific as possible. Assume that you are going to evaluate yourself on these goals at the end of the quarter or semester. The more specific you make these goals, the easier it will be to perform the evaluation. Use Figure 1-3 for guidance.

· 1-2. Consider costs of a system in light of the five components: costs to buy and maintain the hardware; costs to develop or acquire licenses to the software programs and costs to maintain them; costs to design databases and fill them with data; costs of developing procedures and keeping them current; and finally, human costs both to develop and use the system.

· a. Over the lifetime of a system, many experts believe that the single most expensive component is people. Does this belief seem logical to you? Explain why you agree or disagree.

· b. Consider a poorly developed system that does not meet its defined requirements. The needs of the business do not go away, but they do not conform themselves to the characteristics of the poorly built system. Therefore, something must give. Which component picks up the slack when the hardware and software programs do not work correctly? What does this say about the cost of a poorly designed system? Consider both direct money costs as well as intangible personnel costs.

· c. What implications do you, as a future business manager, take from parts a and b? What does this say about the need for your involvement in requirements and other aspects of systems development? Who eventually will pay the costs of a poorly developed system? Against which budget will those costs accrue?

· 1-3. Consider the four definitions of information presented in this chapter. The problem with the first definition, “knowledge derived from data,” is that it merely substitutes one word we don’t know the meaning of (information) for a second word we don’t know the meaning of (knowledge). The problem with the second definition, “data presented in a meaningful context,” is that it is too subjective. Whose context? What makes a context meaningful? The third definition, “data processed by summing, ordering, averaging, etc.,” is too mechanical. It tells us what to do, but it doesn’t tell us what information is. The fourth definition, “a difference that makes a difference,” is vague and unhelpful.

Also, none of these definitions helps us to quantify the amount of information we receive. What is the information content of the statement that every human being has a navel? Zero—you already know that. In contrast, the statement that someone has just deposited $50,000 into your checking account is chock-full of information. So, good information has an element of surprise.

Considering all of these points, answer the following questions:

· a. What is information made of?

· b. If you have more information, do you weigh more? Why or why not?

· c. When you give a copy of your transcript to a prospective employer, how is information produced? What part of that information production process do you control? What, if anything, can you do to improve the quality of information that the employer conceives?

· d. Give your own best definition of information.

· e. Explain how you think it is possible that we have an industry called the information technology industry, but we have great difficulty defining the word information.

COLLABORATION EXERCISE 1

Collaborate with a group of fellow students to answer the following questions. For this exercise, do not meet face to face. Coordinate all of your work using email and email attachments, only. Your answers should reflect the thinking of the entire group, and not just one or two individuals.

· 1. Abstract reasoning.

· a. Define abstract reasoning, and explain why it is an important skill for business professionals.

· b. Explain how a list of items in inventory and their quantity on hand is an abstraction of a physical inventory.

· c. Give three other examples of abstractions commonly used in business.

· d. Explain how Jennifer failed to demonstrate effective abstract-reasoning skills.

· e. Can people increase their abstract-reasoning skills? If so, how? If not, why not?

· 2. Systems thinking.

· a. Define systems thinking, and explain why it is an important skill for business professionals.

· b. Explain how you would use systems thinking to explain why Moore’s Law caused a farmer to dig up a field of pulpwood trees. Name each of the elements in the system, and explain their relationships to each other.

· c. Give three other examples of the use of system thinking with regard to consequences of Moore’s Law.

· d. Explain how Jennifer failed to demonstrate effective systems thinking skills.

· e. Can people improve their system thinking skills? If so, how? If not, why not?

· 3. Collaboration.

· a. Define collaboration, and explain why it is an important skill for business professionals.

· b. Explain how you are using collaboration to answer these questions. Describe what is working with regard to your group’s process and what is not working.

· c. Is the work product of your team better than any one of you could have done separately? If not, your collaboration is ineffective. If that is the case, explain why.

· d. Does the fact that you cannot meet face to face hamper your ability to collaborate? If so, how?

· e. Explain how Jennifer failed to demonstrate effective collaboration skills.

· f. Can people increase their collaboration skills? If so, how? If not, why not?

· 4. Experimentation.

· a. Define experimentation, and explain why it is an important skill for business professionals.

· b. Explain several creative ways you could use experimentation to answer this question.

· c. How does the fear of failure influence your willingness to engage in any of the ideas you identified in part b?

· d. Explain how Jennifer failed to demonstrate effective experimentation skills.

· e. Can people increase their willingness to take risks? If so, how? If not, why not?

· 5. Job security.

· a. State the text’s definition of job security.

· b. Evaluate the text’s definition of job security. Is it effective? If you think not, offer a better definition of job security.

· c. As a team, do you agree that improving your skills on the four dimensions in the Collaboration Exercise Questions will increase your job security?

· d. Do you think technical skills (accounting proficiency, financial analysis proficiency, etc.) provide job security? Why or why not? Do you think you would have answered this question differently in 1990? Why or why not?

CASE STUDY 1: The Amazon of Innovation

On November 26, 2012, Amazon.com customers ordered 26.5 million items worldwide, an average of 306 items per second. On its peak order-fulfillment day, Amazon shipped more than 15.6 million units, and the last unit delivered in time for Christmas was ordered on December 24 at 11:44 AM and delivered that same day, 3 hours later. 12 Such performance is only possible because of Amazon’s innovative use of information systems. Some of its major innovations are listed in Figure 1-8 .

You may think of Amazon as simply an online retailer, and that is indeed where the company achieved most of its success. To do this, Amazon had to build enormous supporting infrastructure—just imagine the information systems and fulfillment facilities needed to ship 15.6 million items on a single day. That infrastructure, however, is only needed during the busy holiday season. Most of the year, Amazon is left with excess infrastructure capacity. Starting in 2000, Amazon began to lease some of that capacity to other companies. In the process, it played a key role in the creation of what are termed cloud services, which you will learn about in Chapter 4 . For now, just think of cloud services as computer resources somewhere out in the Internet that are leased on flexible terms. Today, Amazon’s business lines can be grouped into three major categories:

· • Online retailing

· • Order fulfillment

· • Cloud services

Consider each.

Amazon created the business model for online retailing. It began as an online bookstore, but every year since 1998 it has added new product categories. In 2011, the company sold goods in 29 product categories. Undoubtedly, there will be more by the time you read this.

Amazon is involved in all aspects of online retailing. It sells its own inventory. It incentivizes you, via the Associates program, to sell its inventory as well. Or it will help you sell your inventory within its product pages or via one of its consignment venues. Online auctions are the major aspect of online sales in which Amazon does not participate. It tried auctions in 1999, but it could never make inroads against eBay. 13

Today, it’s hard to remember how much of what we take for granted was pioneered by Amazon. “Customers who bought this, also bought that;” online customer reviews; customer ranking of customer reviews; books lists; Look Inside the Book; automatic free shipping for certain orders or frequent customers; and Kindle books and devices were all novel concepts when Amazon introduced them.

Amazon’s retailing business operates on very thin margins. Products are usually sold at a discount from the stated retail price, and 2-day shipping is free for Amazon Prime members (who pay an annual fee of $79). How do they do it? For one, Amazon drives its employees incredibly hard. Former employees claim the hours are long, the pressure is severe, and the workload is heavy. But what else? It comes down to Moore’s Law and the innovative use of nearly free data processing, storage, and communication.

In addition to online retailing, Amazon also sells order fulfillment services. You can ship your inventory to an Amazon warehouse and access Amazon’s information systems just as if they were yours. Using technology known as Web services (discussed in Chapter 6 ), your order processing information systems can directly integrate, over the Web, with Amazon’s inventory, fulfillment, and shipping applications. Your customers need not know that Amazon played any role at all. You can also sell that same inventory using Amazon’s retail sales applications.

Amazon Web Services (AWS) allows organizations to lease time on computer equipment in very flexible ways. Amazon’s Elastic Cloud 2 (EC2) enables organizations to expand and contract the computer resources they need within minutes. Amazon has a variety of payment plans, and it is possible to buy computer time for less than a penny an hour. Key to this capability is the ability for the leasing organization’s computer programs to interface with Amazon’s to automatically scale up and scale down the resources leased. For example, if a news site publishes a story that causes a rapid ramp-up of traffic, that news site can, programmatically, request, configure, and use more computing resources for an hour, a day, a month, whatever.

Finally, with the Kindle devices, Amazon has become a vendor of both tablets and, even more importantly in the long term, a vendor of online music and video. And to induce customers to buy Kindle apps, in 2013 Amazon introduced its own currency, Amazon Coins.

12“For the Eighth Consecutive Year, Amazon Ranks #1 in Customer Satisfaction During the Holiday Shopping Season,” Amazon.com , last modified December 27, 2012, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1769785&highlight= .

13For a fascinating glimpse of this story from someone inside the company, see “Early Amazon: Auctions” at http://glinden.blogspot.com/2006/04/early-amazon-auctions.html , accessed August 2012.

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