Learning Objectives

By the end of this chapter, you will be able to:

  • Describe the two-way relationship between information systems and organizations.
  • Explain how an organization’s strategy and culture can influence the design and adoption of its IS.
  • Provide examples of how information systems can shape an organization’s structure and processes.

The Two-Way Relationship

Information Systems and organizations have a mutual, two-way relationship. This means that not only do information systems have an impact on the organization, but the organization itself—its structure, culture, politics, and business processes—has a profound influence on the design and implementation of its information systems.

flowchart LR
  subgraph Org["Organization"]
    Strategy["Strategy"]
    Culture["Culture"]
    Staff["People"]
  end
  subgraph IS["Information System"]
    Tech["Hardware and Software"]
    Data["Data and Processes"]
  end
  Strategy --> Tech
  Culture --> Data
  Staff --> Data
  Tech --> Strategy
  Data --> Culture

Figure 1: Two-Way Relationship Between Organization and IS

How Organizations Affect Information Systems

The organization and its culture will shape the type of information systems it builds and how they are used.

  • Strategy: A company focused on being a low-cost leader will build systems that prioritize efficiency and cost reduction. A company focused on innovation will build systems that foster collaboration and creativity.
  • Culture: An organization with a collaborative, open culture will have more success implementing social, collaborative tools than a company with a rigid, hierarchical culture.
  • People: The skills and training of the employees will determine how effectively a new system can be used.

How Information Systems Affect Organizations

Information systems can fundamentally change how a business operates, affecting its structure, processes, and even its products and services.

  • Flattening Organizations: By making information more widely available, IT can empower lower-level employees with more decision-making authority. This can reduce the need for middle managers, leading to a “flatter” organizational structure.
  • Streamlining Business Processes: IT can automate and streamline business processes, making them faster, cheaper, and more accurate. Enterprise Resource Planning (ERP) systems, for example, can integrate processes across the entire organization.
  • Enabling New Business Models: IT can be the foundation for entirely new ways of doing business. The rise of e-commerce (Amazon), the sharing economy (Uber), and digital subscription services (Netflix) are all examples of business models that would be impossible without information systems.

Summary

It is a mistake to think of information systems as just a technical component that can be plugged into a business. There is a complex, two-way relationship between an organization and its technology. The organization’s strategy, culture, and people will influence the design of its systems, and in turn, those systems will have a powerful impact on the organization’s structure, processes, and ability to compete.

Key Takeaways

  • Information systems and organizations have a mutual, two-way relationship.
  • An organization’s strategy and culture shape its information systems.
  • Information systems can flatten organizational structures and streamline processes.
  • IT is a key enabler of new and disruptive business models.

Discussion Questions

  1. How might the information systems at a creative advertising agency differ from those at a large accounting firm?
  2. Explain what is meant by IT “flattening” an organization.
  3. Can a company successfully implement a new information system without changing its business processes? Why or why not?