The Internet, little more than a curiosity to many managers just a decade ago, now influ- ences their lives and jobs in myriad ways. Managers at Arch Coal use the Internet and GPS networking to monitor and manage major mining equipment. Trinchero Family Estates, producer of Sutter Hill wines, uses an online system to track the processing of grapes from harvesting to bottling to selling. And the American Society for the Prevention of Cruelty to Animals used the Web to quickly recruit volunteers after Hurricane Katrina—even though the organization had never before recruited volunteers in its 130-year history.74
Some companies, such as Wal-Mart, are profiting by using Web sites to sell more products, but they are also discovering that the Internet has drawbacks.
Almost every company uses the Internet to some extent as part of its information tech-nology (IT) system. The strategic use of IT is one of the defining aspects of organizational success in today’s world. Managers use information systems that rely on a massive data warehouse to make decisions about what to stock, how to price and promote it, and when to reorder or discontinue items. Handheld scanners enable managers to keep close tabs on in- ventory and monitor sales; at the end of each workday, orders for new merchandise are sent by computer to headquarters, where they are automatically organized and sent to regional distribution centers, which have electronic linkages with key suppliers for reordering. A re- cent innovation is using tiny chips with identification numbers on shipments of products (called radio-frequency identification, or RFID), which enables close tracking of inventory all through the supply chain. At Wal-Mart headquarters, top executives analyze buying pat- terns and other information, enabling them to spot problems or opportunities and convey the information to stores.75 Numerous other companies, in industries from manufacturing to entertainment, as well as not-for-profit and government organizations, are using IT to get closer to customers, enter new markets, and streamline business processes.
IT and e-business have changed the way people and organizations work and thus pres- ent new challenges for managers. The Internet continues to disrupt and transform the tra- ditional ways of business as well as convulse entire industries by giving advantages to nimble upstarts. Yet existing businesses are using e-business to cut costs, increase efficiency, im- prove customer service, speed up innovation, and improve productivity.76 This section explores the management of IT and e-business. We begin by looking at the management implications of using advanced IT. Next, we examine some recent technology trends and the types of information systems frequently used in organizations. Then, the section looks at the growing use of the Internet and e-business, including a discussion of fundamental e-business strategies, business-to-business marketplaces, use of IT in business operations, and the importance of knowledge management.
An organization’s information technology (IT) consists of the hardware, software,telecommunications, database management, and other technologies it uses to store data and make them available in the form of information for organizational decision making. IT, including the use of the Internet for e-business, can enable managers to be better con- nected with employees, the environment, and each other. In general, IT has positive impli- cations for the practice of management, although it can also present problems. Some spe- cific implications of IT for managers, as shown in Exhibit 6.8, include enhanced collaboration, improved employee effectiveness, increased efficiency, empowered employ- ees, and potential information overload.
1. BOUNDARIES DISSOLVE; COLLABORATION REIGNS
Walk into the video conference room at Infosys Technologies, a leader in India’s outsourc- ing and software industry, and the first thing you’ll see is a wall-size flat-screen television. On that screen, Infosys can hold virtual meetings of the key players from its entire global supply chain for any project at any time of the day or night. For example, American design- ers could be onscreen talking to their Indian software writers and their Asian manufacturers all at once.77 Time, distance, and other boundaries between individuals, departments, and organizations are irrelevant in today’s business world. Collaboration is what it’s all about.
One of the most significant advantages of using advanced IT is that it enhances collaboration both within the organization and with customers, suppliers, and partners. As historian Thomas L. Friedman puts it, “Wherever you look today . . . hierarchies are being flattened and value is being created less and less within vertical silos and more and more through horizontal collaboration within companies, between companies, and among individuals.”78 IT can connect employees around the world for the sharing and exchange of information and ideas. The emphasis on using IT rather than personal travel for collaboration is a response to reduced travel budgets and rising airfares, concern over incidents such as international terrorism, and the need for speed in today’s global marketplace.79 Some- times flattening the hierarchy can have negative effects, as shown in the Business Blooper.
2. PEOPLE DO BETTER WORK
IT can provide employees with all kinds of information about their customers, competitors, markets, and service, as well as enable them to instantly share information and insights with colleagues. In addition, with time and geographic boundaries dissolving, a team can work throughout the day on a project in Switzerland and, while they sleep, a team in the United States can continue where the Swiss team left off.
In general, IT enables managers to design jobs to provide people with more intellectual engagement and more challenging work. The availability of IT does not guarantee in- creased job performance, but when implemented and used appropriately, it can have a dra- matic influence on employee effectiveness. For example, an Internet system at Continental Airlines alerts the company when planes arrive late and assesses passengers’ needs, enabling employees to delay the departure of other flights or send carts to make connections easier for passengers. Continental’s various systems for analyzing data to improve customer ser- vice helped the company move into the top ranks in terms of customer satisfaction, after being dead last in the industry during the 1990s.80
3. THINGS ARE MORE EFFICIENT
IT can significantly speed work processes, cut costs, and increase efficiency. McDonald’s is experimenting with a system that allows workers at a call center in Santa Maria, California, to remotely take drive-through orders from 40 restaurants scattered around the United States, in places such as Honolulu, Hawaii; Gulfport, Mississippi; and Gillette, Wyoming. The orders are zapped back to the restaurant via the Internet to be filled, and most custom- ers have no idea their order has just traveled hundreds or thousands of miles. The system saves just a few seconds per order, but over the course of time at a busy drive-through, that adds up to significant cost savings and increased sales.81
Sweeping away administrative paperwork, automating mundane tasks, and standardiz- ing services are other advantages of IT. For example, at IBM, automating customer service helped reduce the number of call center employees and saved $750 million in one year alone. Intermountain Health Care, based in Salt Lake City, Utah, automated its pharma- cies in the 1990s and is now applying IT to standardize medical care, resulting in fewer mistakes, greater consistency in applying the latest medical advances, and lower costs.
4. EMPLOYEES ARE ENGAGED
IT is profoundly affecting the way organizations are structured. With IT, managers can change the locus of knowledge by providing information to people who would not otherwise receive it. Lower-level employees are increasingly challenged with more information and more inter- esting jobs. Nurses, bellhops, truck drivers, utility repair workers, and warehouse staffers all need easy access to information to do their jobs well in today’s fast-paced environment.82
IT enables decisions to be made by the employees who are in the best position to imple- ment them and monitor their effects. For example, the U.S. Army is using new technology that pushes information about battlefield conditions, the latest intelligence on the enemy, and so forth, down the line to the lower troops. Armed with better data and trained to see patterns in the barrage of information, lieutenants in the field are making more of the deci- sions once made by commanders.83 Avnet, a computer systems, component, and embedded subsystems manufacturer, uses an IT system that pushes data on orders, shipment schedules, and dates by which the company will cease manufacturing certain products directly to front-line sales teams, who use this information to modify their work practices and improve customer service.84
5. PEOPLE CAN SUFFER FROM INFORMATION OVERLOAD
Getting data and information to people who need it and can use it to improve their perfor- mance and decision-making is important, but it’s possible to have too much of a good thing. One major problem associated with advances in technology is that the company can become a quagmire of information, with employees so overwhelmed by the sheer volume that they are unable to sort out the valuable from the useless.85
In many cases, the ability to produce data and information is outstripping employees’ abil- ity to process it. One British psychologist claims to have identified a new mental disorder caused by too much information; he has termed it information fatigue syndrome.86 IT is a pri- mary culprit in contributing to this new “disease.” However, managers have the ability to al- leviate the problem and improve information quality. The first step is to ensure that suppliers of IT and CIOs work closely with employees to identify the kinds of questions they must an- swer and the kinds of data and information they really need. Specialists often are enamored with the volume of data a system can produce and overlook the need to provide small amounts of quality information in a timely and useful manner for decision making. Top executives should be actively involved in setting limits by focusing the organization on key strategies and on the critical questions that must be answered to pursue those strategies.
Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.