Chapter 3

The meaning of disruptive technologies:

  • disruptive technology is one that displaces an established technology and shakes up the industry or a ground-breaking product that creates a completely new industry.
  • Technology that brings about sweeping change to businesses, industries, markets.
  • Substitute product performs as or better than the current product.

First movers and fast followers

  • First movers: inventors of disruptive technologies example iPhone always invent new technology
  • Fast followers: firms with the size and resources to capitalize on that technology other mobile device company whose follow iPhone company

How does information system (IS) impact the industry

  • Economic impact
  • Organization and behavior impact

First: Economic impact

  • IT lowers market transaction costs for organizations, making it worthwhile for organizations to transact with other organizations rather than grow the number of employees.

Example many companies now a day use outsourcing and external supplier

transaction cost theory. This theory states organizations seek to economize (minimize) transaction costs (the costs of participating in markets/doing business

  • Strategies: to achieve economies of scale use vertical integration (e.g. Facebook buying Whatsapp, buying suppliers and distributors

Example   Music industry move from old music industry to new music industry by lowers market transaction costs  anyone now can by online music no need to physical stores

  • IT can reduce internal management costs called agency costs
  • Agency theory states that organizations employ people who need supervision. Otherwise, they will pursue self-interest. This requires higher cost (to pay higher overheads).
  • IT can reduce agency costs, through reducing the need for acquiring & analyzing information.
  • Example

Cairo install GPS System to monitor their employee while reducing overtime cost

IT reduce both Agency cost and transaction cost of the firm, so should expect firm size Shrink over time and have lower management cost and revenue per employee increase

 

Second Organization and behavior impact

  • IT flatten organization
  • Postindustrial organization

 

IT flatten organization

  • A flat organization (also known as a horizontal organization or delayering) has an Organizational structure with few or no levels of middle management between staff and executives. An organization’s structure refers to the nature of the distribution of the units and positions within it, also to the nature of the relationships among those units and positions. Tall and flat organizations differ based on how many levels of management are present in the organization, and how much control managers are endowed with.
  • Decision level pushed to lower level
  • Fewer manager needed will fasten decision making and increase control

Postindustrial organization

Organization flatten because post industry societies, authority will increase, recline on knowledge and competence more than formal position

What are general features of an organization? Explain them in your own words.

All modern organizations share certain characteristics. They are bureaucracies with clear-cut divisions of labor and specialization. Organizations arrange specialists in a hierarchy of authority in which everyone is accountable to someone and authority is limited to specific actions governed by abstract rules or procedures. These rules create a system of impartial and universal decision-making. Organizations try to hire and promote employees on the basis of technical qualifications and professionalism (not personal connections). The organization is devoted to the principle of efficiency: maximizing output using limited inputs. Other features of organizations include their business processes, organizational culture, organizational politics, surrounding environments, structure, goals, constituencies, and leadership styles. All of these features affect the kinds of information systems used by organizations.

How does information system (IS) impact the industry? Explain it and provide an example.

Information Technology lowers market transaction costs for organizations, making it worthwhile for organizations to transact with other organizations rather than grow the number of employees. This supports the transaction cost theory. Transaction cost theory states organizations seek to economize (minimize) transaction costs (the costs of participating in markets) just as they do for production costs. For example, companies like Dell use computers and network to link them to outsourcers instead of making the parts themselves.

Information technology also can reduce internal management costs. According to agency theory, the firm is viewed as a “nexus of contracts” among self-interested individuals rather than as a unified, profit-maximizing entity.

Agency theory states that organizations employ people who need supervision. Otherwise they will pursue self-interest. This requires higher cost. IT can reduce agency costs, through reducing the need for acquiring & analyzing information. It also reduce the number of middle managers and clerical workers by increasing revenues e.g. managing inventories and processing orders.

Because IT reduces both agency and transaction costs for firms, we should expect firm size to shrink over time as more capital is invested in IT. Firms should have fewer managers, and we expect to see revenue per employee increase over time.

Postindustrial organizations are Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions.

Organizational and behavioral impacts, Theories based in the sociology of complex organizations also provide some understanding about how and why firms change with the implementation of new IT applications.

  • IT flattens organizations
  • Decision-making is pushed to lower levels.
  • Fewer managers are needed (IT enables faster decision making and increases span of control).

What is transaction cost theory? Explain it.

Transaction cost theory states organizations seek to economize (minimize) transaction costs (the costs of participating in markets) just as they do for production costs.

What was the business problem that Comair faced?

The Business problem is that the company was losing money, as an estimate they have lost more than $20 million due to system failure, they have also lost their company reputation. All of that was a result of the network system crash during the holidays. That system was old and listed to be replaced yet management was distracted with other business matters and they were comfortable with the old system in which business processes were inextricably linked to the system, the decision to replace the system came too late. Another factor into this issue was that the IT management have changed frequently during that time and the IT did not push the project to be implement yet they were waiting for the business function to make the decision to implement the project. The company also was acquired by another airline company (Delta), which gave the higher management more priorities.

References

http://whatis.techtarget.com/definition/disruptive-technology

https://en.wikipedia.org/wiki/Flat_organization

https://www.coursehero.com/file/p5qhj4u/Decision-making-pushed-to-lower-levels-Fewer-managers-needed-IT-enables-faster/

 

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