What information systems of the business will you use to determine the reason for the poor sales

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Advances in computer-based information technology in recent years have led to a wide variety of systems that managers are now using to make and implement decisions. By and large, these systems have been developed from scratch for specific purposes and differ significantly from standard electronic data processing systems. Too often, unfortunately, managers have little say in the development of these decision support sysems; at the same time, non-managers who do develop them have a limited view of how they can be used. In spite of these drawbacks, the author found that a number of the 56 systems he studied are successful. And the difference between success and failure is the extent to which managers can use the system to increase their effectiveness within their organizations. Thus, the author suggests that this is the criterion designers and managers should jointly ascribe to in exploiting the capabilities of today’s technologies.

What can managers realistically expect from computers other than a pile of reports a foot deep dumped on their desks every other week?

A version of this article appeared in the November 1976 issue of Harvard Business Review.

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No single system can provide all the information an organization needs. Even small firms have a collection of different systems: e-mail systems, sales tracking systems, etc. Different systems can be described through:

• A functional perspective: Identifying systems by their major business function
• A constituency perspective: Identifying systems in terms of the major organizational groups that they serve

There are four main types of information systems that serve different functional systems:

1. Sales and marketing information systems help the firm with marketing business processes (identifying customers for the firm's products or services, developing products and services to meet their needs, promoting products and services) and sales processes (selling the products and services, taking orders, contacting customers, and providing customer support).

Figure 2-2

FIGURE 2-2 EXAMPLE OF A SALES INFORMATION SYSTEM This system captures sales data at the moment the sale takes place to help the business monitor sales transactions and to provide information to help management analyze sales trends and the effectiveness of marketing campaigns.

Figure 2-3

FIGURE 2-3 OVERVIEW OF AN INVENTORY SYSTEM This system provides information about the number of items available in inventory to support manufacturing and production activities.

Figure 2-4

FIGURE 2-4 AN ACCOUNTS RECEIVABLE SYSTEM An accounts receivable system tracks and stores important customer data, such as payment history, credit rating, and billing history.

1. Human resources information systems maintain employee records, track employee skills, job performance and training, and support planning for employee compensation and career development.

Figure 2-5

FIGURE 2-5 AN EMPLOYEE RECORD KEEPING SYSTEM This system maintains data on the firm’s employees to support the human resources function.

There are four main categories of systems from a constituency perspective.

1. Transaction processing systems (TPS) are basic business systems that serve the operational level of the organization by recording the daily routine transactions required to conduct business, such as payroll and sales receipts.
2. Management information systems (MIS) serve middle managers' interests by providing current and historical performance information to aid in planning, controlling, and decision making at the management level. MIS typically compress TPS data to present regular reports on the company's basic operations.
   

Figure 2-6, Figure 2-7

FIGURE 2-6 HOW MANAGEMENT INFORMATION SYSTEMS OBTAIN THEIR DATA FROM THE ORGANIZATION’S TPS In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports.

FIGURE 2-7 SAMPLE MIS REPORT This report showing summarized annual sales data was produced by the MIS in Figure 2-6.

1. Decision support systems (DSS), or business intelligence systems, help managers with non-routine decisions that are unique, rapidly changing, and not easily specified in advance. DSS are more analytical than MIS, using a variety of models to analyze internal and external data or condense large amounts of data for analysis.
   

Figure 2-8

FIGURE 2-8 VOYAGE-ESTIMATING DECISION-SUPPORT SYSTEM This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts.

1. Executive support systems (ESS) provide a generalized computing and communications environment that help senior managers address strategic issues and identify long-term trends in the firm and its environment. ESS address nonroutine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. ESS present graphs and data from many internal and external sources through an interface that is easy for senior managers to use. Often the information is delivered to senior executives through a portal, which uses a Web interface to present integrated personalized business content.
   

Figure 2-9

FIGURE 2-9 MODEL OF AN EXECUTIVE SUPPORT SYSTEM This system pools data from diverse internal and external sources and makes them available to executives in an easy-to-use form.

Ideally, these constituency-based systems are interrelated. TPS are typically a major source of data for other systems, whereas ESS are primarily a recipient of data from lower-level systems and external sources.

Figure 2-10

FIGURE 2-10 INTERRELATIONSHIPS AMONG SYSTEMS The various types of systems in the organization have interdependencies. TPS are major producers of information that is required by many other systems in the firm, which, in turn, produce information for other systems. These different types of systems are loosely coupled in most business firms, but increasingly firms are using new technologies to integrate information that resides in many different systems.