Managing Digital Systems

Running head: MANAGING DIGITAL FIRMS 1

Managing Digital Firms

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MANAGING DIGITAL FIRMS 2

Managing Digital Firms

Introduction

Information is one of the leading resources of a company around which business

processes unfold. The overall performance of a company is contingent on the flow of

information between different constituent elements. Managerial decisions largely depend on the

carefully analyzed information including on-going projects, distribution, demand forecasting,

customer communication, production, stock levels, and supplier information among many other

constituents of a business firm. In the advent of rapid globalization, technological dynamics, and

inter-organizational dependency that shape the modern-day business, the need for appropriate

information management systems is inevitable to handle the plethora of complex operations

(Mabry, Chengho & Bigler, 2014). The term ‘digital firm’ has gained popularity to define this

emerging trend in contemporary business. In the last one decade, a new class of integrated

software applications has emerged with a view of enabling the digital firm to manage the

complexity of the information involved effectively. This paper critically analyzes the integrated

information systems that can help the digital business handle the flow of information efficiently

to promote the smooth movement of the organizational processes and profitability.

Review

Over the past decade, rapid technological changes have impacted the operations of the

modern business in a plethora of ways. Technology has facilitated the flow and sharing of

information between the different elements of enterprises (Laudon & Laudon, 2013).

Digitization has enhanced the application of integrated information systems in many business

operations such as supply chain management and distribution. Moreover, digitization has

leveraged sharing of information across company departments regardless of the complexity and

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distance involved. For instance, integrated information systems have transformed business

models removing the barriers to entry across the globe. Today, a company can engage over 500

million Skype users using the Voice-Over-Internet Protocol (VoIP) technology (Alaa &

Fitzgerald, 2013). Such tech-savvy forums of sharing information have fundamentally disrupted

the traditional practices. As a consequence, most firms have followed suit in fear of missing the

competitive edge inherent in technological improvement (Durugbo & Riedel, 2013).

Recently, many organizations have used social media channels for brand creation, the

launching of products, and networking with customers. It is common practice for consumers to

use the internet to search for information regarding goods and services. They compare quality

and prices. Also, consumers use the Internet to check for available substitutes from competing

companies (Laudon & Laudon, 2013). It is the role of digital firms to act in response to such

emergent consumer behaviors. As such, the use of integrated information systems to capture data

is not an option. Researchers reveal that companies can streamline business strategies upon the

adoption of integrated information systems. Web-based technologies have changed retail

business. Notably, researchers posit that the Internet of Things (IoT) has led to the emergence of

new winners and losers.

Firms such as the Amazon Inc., whose annual sales totaled US$3.2 Billion in 2001,

skyrocketed to approximately US$49 billion a decade later when digitization rues. E-commerce

has made the Amazon.com a winner in its industry while rivals such as the brick-and-mortar

retailers and Borders have lost ground. The primary role of information is to merge business

operations and functions by providing the base for managerial decisions. The goal of managing

information is to achieve the intended enterprise objectives including improving firms’

performance and sustaining growth. Some of the benefits of the efficient information systems

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include a better understanding of the business functions, proper problem analysis, and value-

added communication among the different constituents of an enterprise. Other advantages

include the formulation of timely and informed decisions for better firm control. The

performance of businesses depends on the implementation of information systems, which are

comparable to a library system that provides useful data to the entire management levels of an

organization.

Shortcomings of Traditional Information Systems

Traditional business models face the problem of non-conformity to the changing business

environment. Traditional firms utilize the conventional information management systems and

tools that do not match the contemporary market demands. A substantial amount of literature

puts forward numerous problems associated with the traditional information systems. First, they

adopt a top-down decision-making process where senior managers formulate orders for the less

informed subordinates to implement (Laudon & Laudon, 2013). There is a lack of proper

coordination of information due to the burdening hierarchical management system. Second, they

require information systems that link the different departments. This disconnection leads to

failed functions, duplication of reports, and delayed communication, situations that affect the

overall performance of the enterprise.

In most organizations, the separate departments including accounting, human resources

(HR), marketing, sales, and production had independent information systems (Laudon &

Laudon, 2013). In the orthodox management plan, strategic decision-making was challenging

since the acquisition of information for analysis involved lengthy processes. Data regarding the

various departments was available in separate files with different versions that the general

manager took long before making informed decisions. With each department having different

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computer programs to operate implied that there were multiple files created. In a five or ten-year

span, the size of records created can be enormous, giving managers the burden of handling and

loss of time. These problems can be a source of demotivation, fatigue, and increased turnover

rates.

Firms that utilize the traditional information handling methods are prone to failure owing

to the lack of coordination and duplication of roles that result in resource wastage and untapped

opportunities (Mabry, Chengho, & Bigler, 2014). The planning process conducted without

current information results in recurring failure in the enterprise. Some researchers argue that

planning cycles in the traditional firms can be too long, and do not match the pace of the

changing business environment. Such problems make the management of companies hard

because they rely on the traditional methods concentrating on past scenarios. The traditional data

handling systems suffer the problem of data redundancy and inconsistency (Laudon & Laudon,

2013). Such instances and adverse trends can be resolved using the modern integrated

information systems that communicate between the internal and external environments of the

enterprise. The current management practice also boosts the coordination of operations to

establish a central information system that enables the supervision of each unit.

Information Systems of Digital Firms

Many new companies have acknowledged the role of information as an ingredient of the

organizational communication function. The IT department in most companies manages the

organization of information (Mabry et al., 2014). Its governance entails the policies and

strategies that govern the utilization of technology to handle the company information. It guides

the decision-making processes (Laudon & Laudon, 2013). Furthermore, it draws the

accountability framework to ensure that the appropriate technology is executed to facilitate the

MANAGING DIGITAL FIRMS 6

smooth flow of information in the organization. The systems form a part of a series of value-

adding activities for acquisition, transformation, and distribution of information that can be

utilized by the managers to improve decision-making.

Organizations face challenges that stem from both the internal and external environments.

Information systems are designed to offer reliable solutions to such organizational problems

(Mabry et al., 2014). The information systems transform data into meaningful knowledge to

guide decision-making to improve corporate performance. The realization of organization’s

strategic goals is often slow when proper information management systems are lacking. The

systems help firms to achieve functional superiority, improve customer relations, enhance value-

added decisions, and leverage market effectiveness. Technically, the systems assist in the

collection of data, storage, and timely dissemination of information for the firms’ micro and

macro environments (Balfe, Sharples, & Wilson, 2015). These operations fall into the categories

of input, processing, and output. They help to provide solutions to problems facing the business

initiatives of the enterprises.

Enterprise Resource Planning (ERP)

One of the most proactive and proven IIS software is the Enterprise Resource Planning

(ERP) system. This software helps business firms to integrate a range of business functions and

processes to establish a central system for managing the entire business errands (Durugbo &

Riedel, 2013). This software has been adopted mainly by not only the multinationals but also

small and medium-sized enterprises (SMEs). This move has enabled them to cut the unnecessary

operational costs. The ERP concept assumes various dimensions. At the outset, it is a marketed

product sold as computer application software. Second, the ERP is a development goal mapping

all enterprise data and processes into a comprehensive and integral structure. Third, some people

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view it as a component of an infrastructure that provides intelligent business solutions (Uçaktürk

& Villard, 2013).

The ERP system is designed to promote an aggressive and efficient business strategy

with a view of enabling firms to manage their resources including the materials, workforce,

suppliers, customers, and finance. It provides a wholesome and integrated solution for the

enterprise’s information processing needs. The ERP also provides the standardization of the

business processes across the firm (Balfe, Sharples & Wilson, 2015). It is known for its business

revolutionizing capabilities including the automation and integration of the company’s processes,

sharing of common data and practices across the entire business, and providing access to

information in a real-time environment.

The ERP can improve the business processes while cutting the perceived operational

costs. The two important frontiers for the software include the supply chain management and e-

commerce (Drnevich & Croson, 2013). Testing of the capabilities and effectiveness of the ERP

system is observable through its widespread application in the supply chain management where

it connects numerous business functions. Firms can slash the cycle times and reduce the

inventory with the help of the ERP. Despite its famed implementation costs, the ERP system

prevents errors that enterprises can make with the traditional handling of operations.

The successful implementation and functionality of the ERP system are contingent on its

alignment with the organizational processes and correspondence to the enterprise culture,

strategy, and organizational structure (Uçaktürk & Villard, 2013). The system seeks to improve

both the fundamental and front-end functions of the company simultaneously. Various reports

indicate that the ERP has gained substantial market popularity due to its capability to include

additional business services such as the Internet-based transactions and communications. The

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users are reaping the benefits of managing information from a system that permits other

processes to the ones configured initially.

Evidence-Based Application of the ERP System as an Integrated Information Tool

Numerous companies that are among the leading firms worldwide have applied the ERP

system. The first enterprise software vendors include the Oracle, SAP, and SSA Global.

Currently, there are versions of the ERP software packages designed for Small and Medium-

Sized Enterprises (SMEs) obtainable via the webs offered by various service providers (Durugbo

& Riedel, 2013). These systems can communicate with the external business elements including

the customers, suppliers, and other organizations alongside the initial design for the internal

operations of the firm. The ERP framework provides value to the companies by increasing the

operational efficiency. It also integrates company’s information into the system thereby

underpinning the formulation of decisions that are more informed (Alaa & Fitzgerald, 2013).

Big corporations whose operations are highly complex involving extended supply chain

and many management departments have attested the effectiveness of the ERP (Laudon &

Laudon, 2013). The system helps the companies by providing them with standardized data that is

used by all the stakeholders regardless of their different locations. For instance, the

implementation of the SAP enterprise software enabled the Coca-Cola Company to standardize

and coordinate its business processes in over 200 countries around the globe (Blessing, 2014).

Before the adoption of the SAP enterprise software, the company was having trouble leveraging

its global business processes. The implementation of the ERP system led to an increased global

buying power of the products and response to the rapid market changes (Durugbo & Riedel,

2013).

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The ERP systems help firms respond timely to requests and orders from the customers

since the software facilitates the integration of information on the incoming orders,

manufacturing processes, and delivery of data. In this way, the firm produces in response to the

requests made by the customers (Drnevich & Croson, 2013). Also, this integration enables the

procurement process to determine the number of the raw materials required in response to the

manufacturing needs of refilling the original orders (Drnevich & Croson, 2013). Similarly, the

Alcoa Company made a groundbreaking reduction of the transaction costs after implementing

the Oracle enterprise software. The software also resulted in the decrease of the redundant

processes and systems. Before the implementation of the ERP, the company took exceedingly

long before receiving the payments for delivered products due to the absence of a system to

process the receipts. Following the successful acquisition and implementation of the Oracle ERP

system, the Alcoa Company accounts payable transaction processing saw an 89% sharp drop.

Application of Integrated Information Systems in Customer Relationship Management

Marketing researchers agree that establishing a knowledge base of a firm’s customers is

the most competitive phenomenon in the modern-day business environment. The traditional

assumption of gaining a competitive edge through sheer movement of a lot of products or

demonstrating the best innovation does not match the power of customer analysis (Uçaktürk &

Villard, 2013). Sustainable firm’s growth and profitability do not only depend on constant

innovation but also the proper understanding of consumer dynamics. Organizations can gain

knowledge of audience by using integrated information systems in the customer relationship

management (CRM) strategy (Laudon & Laudon, 2013). CRM aims at developing a system that

enables a proper understanding of consumer needs and consumption behaviors. Large companies

with diverse market niches need to apply CRM to study customer behaviors. This situation

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creates a need to come up with the best strategic information systems to facilitate an accurate

synthesis of all the information incoming from different channels including telephone, websites,

social media, and face-to-face communication.

The CRM seeks to gather and integrate, consolidate, analyze, and redistribute consumer

data to various contact points that include communication through e-mails, telephone, websites,

wireless devices, and retail sites. Advanced CRM packages have modules for partner relationship

management (PRM) and employee relationship management (ERM) (Drnevich & Croson, 2013).

The PRM software promotes the association between the firm and its partners such as suppliers,

shareholders, and sponsors. On the other hand, the ERM software deals with the workforce

issues such as employee performance, formulation of goals, compensation, appraisals,

recruitment, and training among others.

Software programs such as the Sales Force Automation (SFA) utilized in the CRM

systems helps the sales workforce to speed up production processes by directing more efforts

towards the most valuable and profitable customers. The SFA generates information on the sales

prospects, contact, and configuration of the best candidates for substantial prospective purchases.

It communicates this information to the sales personnel to underpin the formulation of better

decisions. The CRM systems generate useful information including the amount of revenue made

against the costs incurred in servicing the customer (Laudon & Laudon, 2013). This analytical

CRM function focuses on establishing the Customer Lifetime Value (CLTV), which portrays the

long-term firm-consumer relationship.

Conclusion

Organizations that intend to survive the tantrums of the Twenty-First Century must

acknowledge the usefulness of integrated information systems. It is evident that lack of proper

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information systems often leads to poor coordination of many organizational functions. Digital

firms have implemented integrated information systems, which in turn have prevented many

costs associated with duplication, lost information, unattended customers, and skipped processes

among others. As organizations grow complex, the size of information involved becomes

enormous. In the wake of globalization, companies need integrated information systems such as

the ERP to manage operations such as customer relationships and supply chain. There exists a

growing evidence-based application of integrated information systems in many organizations

including Coca-Cola, Alcoa Company, and the Amazon.com. Moreover, supply chain and

customer relationships are perfect examples where enterprise resource planning has proven

successful.

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References

Alaa, G., & Fitzgerald, G. (2013). Re-conceptualizing Agile Information Systems Development

using Complex Adaptive Systems Theory. Emergence: Complexity &

Organization, 15(3), 1-23.

Balfe, N., Sharples, S., & Wilson, J. (2015). The impact of automation: Measurement of

performance, workload, and behavior in a complex control environment. Applied

Ergonomics, 47(1), 52-64.

Blessing Mavengere, Nicholas. (2014). The role of Information Systems for Strategic Agility in

Supply Chain Setting: Telecommunication Industry Study. Electronic Journal of

Information Systems Evaluation, 17(1), 100-112.

Drnevich, P., & Croson, D. (2013). Information technology and business-level strategy: toward

an integrated theoretical perspective. MIS Quarterly, 37(2), 483-509.

Durugbo, C., & Riedel, J. (2013). Readiness assessment of collaborative networked

organizations for integrated product and service delivery. International Journal of

Production Research, 51(2), 598-613.

Laudon, K., & Laudon, J. (2013). Management of Integrated Information Systems: Managing the

digital firm. New Jersey, NJ: Prentice Hall.

Mabry, S., Chengho, H., & Bigler, W. (2014). Quantifying the value of the service-oriented

approach to business information systems. Business Studies Journal, 6(1), 1-22.

Uçaktürk, A., & Villard, M. (2013). The Effects of Management Information and ERP Systems

on Strategic Knowledge Management and Decision-making. Procedia - Social and

Behavioral Sciences, 99(1), 1035-1043.

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