Unit 2 · Session 2
Information Systems and Organization
Today's focus
- The organization's "DNA" shapes the technology it builds.
- Technology is not just a tool; it's a force for change.
🎯 Learning Objectives
By the end of this session, you will be able to:
- ✅ Describe the two-way relationship between information systems and organizations.
- ✅ Explain how an organization's strategy and culture influence its IS.
- ✅ Provide examples of how IS can shape an organization's structure and processes.
The Core Concept: A Two-Way Street
Information systems and organizations have a mutual, two-way relationship.
Organization → Information Systems
Information Systems → Organization
It's a mistake to think of IS as just a technical tool. It's a deeply integrated partnership.
🔄 Interactive: The IS↔Organisation Loop
Click a box to see examples of influence in that direction
Click → shapes IS
Click → shapes Org
💎 The Sociotechnical View: Leavitt's Diamond
Management researcher Harold Leavitt showed that every organisation has four connected parts. Change one, and the other three must adjust.
- 🧩 Task: the work that gets done
- 👥 People: their skills, habits and attitudes
- 🏢 Structure: roles, reporting lines and rules
- 💻 Technology: the tools and information systems
Example: A bank launches a mobile banking app (technology).
- Task: fewer cash and deposit visits at the counter
- People: tellers retrain as advisers
- Structure: fewer branch staff, and a new digital team
An IS project is never only a technology project. It is also a change in people, tasks and structure.
The organization's "DNA" shapes the technology it builds.
Example: Strategy's Influence
Accounting Firm vs. Advertising Agency
📊 Large Accounting Firm
Strategy: Accuracy, security, efficiency.
Resulting IS:
- Highly structured databases
- Secure, access-controlled systems
- Automated auditing tools
🎨 Creative Ad Agency
Strategy: Creativity, collaboration, speed.
Resulting IS:
- Cloud-based file sharing (e.g., Figma, Google Drive)
- Project management tools (e.g., Slack, Asana)
- Digital asset management systems
🎯 Scenario: Match the IS to the Strategy
1️⃣ Click a company card → 2️⃣ Click the best-fit IS below
🛒 Bhatbhateni Supermarket
Large retail chain, 20+ stores. Focus: cost control, stock accuracy, fast checkout.
⚖️ Sarathi Law Associates
Kathmandu law firm. Needs: secure client files, case histories, deadlines tracked.
🚀 Deerwalk Services
Nepal IT startup. Remote teams, agile sprints, rapid feature deployment.
Technology is not just a tool; it's a force for change.
Effect 1: Flattening Organizations
IT empowers employees and reduces bureaucracy.
Before IT
Information is slow and flows up and down a rigid hierarchy.
CEO
|
VP -- VP
| |
MGR--MGR--MGR
| | |
EMP--EMP--EMPAfter IT
Information is widely available, empowering lower-level employees with decision-making authority.
CEO
|
-----------------
| | |
EMP --- EMP --- EMP
(with data access)Result: Fewer middle managers are needed, leading to a "flatter," more agile organization.
🎬 Zappos: Cutting Management Layers
Zappos.com, "A Little Bit About Holacracy" (0:00 to 0:42)
🏢 Simulation: Org Structure Flattening
🧮 Worked Example: Counting the Layers
A company has 625 frontline staff. How many managers does it need?
Each manager supervises 5 people
CEO → 5 → 25 → 125 managers → 625 staff
156 managers in 4 management layers
With good IS, each manager supervises 25
CEO → 25 managers → 625 staff
26 managers in 2 management layers
- That's 130 fewer manager posts and 2 fewer layers.
- A message from the front line to the CEO now passes through 1 manager instead of 3.
Information systems let one manager track many more people, through dashboards, reports and shared data. That's what makes a flatter structure possible.
Effect 2: Streamlining Business Processes
Making work faster, cheaper, and more accurate.
Example: Enterprise Resource Planning (ERP) Systems
Before ERP, departments worked in silos with separate systems:
Sales System 🧱 Finance System 🧱 Warehouse System
After ERP, a single integrated system connects the entire organization:
Sales ↔️ Finance ↔️ Warehouse ↔️ HR
This automation and integration makes processes like "order-to-cash" incredibly efficient.
⚡ Before vs. After: Manual vs. ERP Process
⚠️ When IS Meets People: Resistance to Change
Why people resist
- Fear of losing their job
- Fear of losing power, when information they used to control becomes shared
- Having to learn a new system while doing their normal work
- Not being told why the change is happening
How good managers respond
- Involve users early in designing the system
- Train people properly before go-live
- Pick respected staff as "champions"
- Roll out in phases, not all at once
Many IS projects that fail have working technology. They fail because the people and processes were not ready.
🍫 Case Study: The ERP That Ruined Halloween
- In 1999, chocolate maker Hershey spent about $112 million on a new ERP and supply-chain system.
- To finish fast, it cut the planned timetable and switched everything on at once, in July, just before its busiest season: Halloween.
- Orders went into the system but did not come out properly. Warehouses were full, yet stores did not receive their sweets. Around $100 million of orders could not be delivered on time.
- That quarter, Hershey's profits fell by about 19%, and its share price dropped sharply.
Discuss: Using Leavitt's diamond, which parts besides technology did Hershey not prepare? What would you have done differently?
Hershey's factory, Pennsylvania (1976 photo)
Effect 3: Enabling New Business Models
IT as the foundation for digital disruption.
Many of today's largest companies would be impossible without sophisticated information systems.
E-Commerce
Global marketplace, recommendation engines, logistics networks.
Sharing Economy
Real-time matching of supply (drivers) and demand (riders).
Digital Subscriptions
Streaming content on-demand, personalized recommendations.
🎬 Uber: The Matching System Is the Business
Uber, "How Uber Matches Riders and Drivers | What Moves Us" (0:10 to 1:17)
🎬 Netflix, 2010: Why Streaming Beats DVD
CNN Business, "Netflix: DVDs dead, streaming lives" (0:20 to 1:07), Reed Hastings in 2010
🇳🇵 Which IS Made This Possible? Nepal Quiz
Select the IS type that made each Nepal service possible, then check your answers:
Practical Application: The Nepali Context
How IS is transforming business in Nepal.
🔍 Case Study: Digital Transformation in Nepal
Digital Payments (eSewa, Khalti)
Enabled a new business model for cashless transactions, utility payments, and mobile top-ups, changing how people and businesses handle money.
Ride-Sharing (Pathao, inDrive)
Created a new "sharing economy" model for transportation, using GPS and matching algorithms to connect riders and drivers efficiently.
These companies did not just introduce new technology; they introduced entirely new ways of operating that reshaped their respective industries in Nepal.
🌍 Global Case: M-Pesa, a New Business Model in Kenya
- In 2007, the Kenyan mobile operator Safaricom launched M-Pesa, which lets people send and store money by text message, even on basic phones and with no bank account.
- Thousands of small shops became agents, where customers turn cash into mobile money and back.
- It is now used by tens of millions of people across several African countries.
- A 2016 study in the journal Science estimated that mobile money lifted about 2% of Kenyan households out of extreme poverty.
Compare: How is M-Pesa similar to eSewa and Khalti in Nepal, and how is it different? Who gains, and who loses, when a phone company starts acting like a bank?
M-Pesa agent shop, Nairobi
Summary & Key Takeaways
Remember the two-way relationship.
- Information systems and organizations mutually influence each other. One does not exist in a vacuum.
- An organization's strategy, culture, and people will dictate the kind of systems it builds and how they are used.
- In turn, information systems can flatten organizational structures, streamline core processes, and reduce costs.
- Most importantly, IT is a powerful enabler of new, disruptive business models that can redefine entire industries.
Discussion Questions
- How might the information systems at a creative advertising agency differ from those at a large accounting firm? (Think culture and strategy).
- Explain in your own words what is meant by IT "flattening" an organization. What is the role of middle managers in this new structure?
- Can a company successfully implement a new information system (like an ERP) without changing its business processes? Why or why not?
Image Credits
- Leavitt's diamond diagram: made for this course —
/blog/assets/images/slides/it231/leavitt-diamond.png - "Zappos headquarters at Stewart and Las Vegas": Svoboda v práci, CC BY-SA 2.0 — https://commons.wikimedia.org/wiki/File:Zappos_headquarters_at_Stewart_and_Las_Vegas.jpg
- "Hershey Factory" (1976): Antarctic96, CC BY-SA 3.0 — https://commons.wikimedia.org/wiki/File:Hershey_Factory.jpg
- "Netflix envelope": Marit & Toomas Hinnosaar, CC BY 2.0 — https://commons.wikimedia.org/wiki/File:Netflix_envelope_(2655128664).jpg
- "M-PESA mobile money and Equity agent, Nairobi, Kenya": Fiona Graham, CC BY-SA 2.0 — https://commons.wikimedia.org/wiki/File:M-PESA_mobile_money_and_Equity_agent,_Nairobi,_Kenya.jpg
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Video Credits
- "A Little Bit About Holacracy": Zappos.com, via YouTube
- "How Uber Matches Riders and Drivers | What Moves Us": Uber, via YouTube
- "Netflix: DVDs dead, streaming lives": CNN Business, via YouTube
Exam Practice 📝
Short answer
- What is meant by the two-way relationship between IS and organizations?
- What is business process reengineering?
- List three reasons why employees resist new information systems.
Long answer
- Explain how organizations affect information systems and how information systems affect organizations.
- How can information systems help an organization gain competitive advantage? Explain with examples.
Revise the answers in the full note linked on the last slide.
Thank You
Questions before we wrap this hour?
Next: Unit 2 · Session 3 — IT for Business, Individuals, and BIS
📖 Related chapter notes
Read first, then revise with this deck: