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.

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?