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Moving towards digital firm
THERE is a growing interdependence between business strategy, rules and procedures on one hand and information systems software, hardware, databases and telecommunications on the other. A change in any one of these components often requires changes in others. This relationship becomes critical when the management plans for the future.
Building and managing systems today involves a much larger part of the organisation than it did in the past. As companies move toward digital firm organisation, nearly all managers and employees – as well as customers and vendors participate in a variety of firm systems, tied together by a digital information web.
One reason that information systems play such a large role in organisations and affect so many people is the soaring power and declining cost of computer technology. Because it offers so many new possibilities for doing business, the internet capability known as the World Wide Web is of great interest to organisations and managers. All web pages maintained by an organisation or individual are called a website. Businesses are creating websites with stylish typography, colourful graphics, push-button interactivity and, often, sound and video to disseminate product information widely, to “broadcast” advertising and messages to customers, to collect electronic orders and customer data and, increasingly, to coordinate far-flung sales forces and organisations on a global scale.
Networked enterprises
The explosive growth of computing power and networks, including the internet, is turning organisations into networked enterprises, allowing information to be instantly distributed within and beyond the organisation. Companies can use this information to improve their internal business processes and to coordinate these business processes with those of other organisations. These new technologies for connectivity and collaboration can be new uses of information systems and new business models. The internet provides the primary technology platform for the digital firm.
Large bureaucratic organizations, which primarily brought about increased computer usage, are often inefficient, slow to change, and less competitive than newly created organisations. Some of these large organisations have downsized, reducing the number of employees and the number of levels in their organisational hierarchies. In digital firms, hierarchy and organisational levels do not disappear. But digital firms develop “optimal hierarchies” that balance the decision-making load across an organisation, making them flatter organisations.
Information technology is also recasting the management process by providing powerful new roles for more grease planning, forecasting, and monitoring. For instance, it is now possible for managers to obtain information on organisational performance down to the level of specific transactions from just about anywhere in the organisation at any time.
The communications technology has eliminated distance as a factor for many types of work in many situations. Salespeople can spend more time in the field with customers and have more up-to-date information. Collaborative teamwork across thousands of miles has become a reality as designers work on a new product together even if they are located on different continents.
Information systems have been progressively replacing manual work procedures with automated work procedures, work flows, and work processes. Electronic workflows have reduced the cost of operations in many companies by displacing paper and the manual routines that accompany it. Improved workflow management has enabled many corporations to not only cut costs significantly but also to improve customer service at the same time.
Information systems can make the production process more flexible so that products can be tailored to each customer's unique set of requirements. Software and computer networks can be used to link the plant floor tightly with orders, design and purchasing and finely control production machine so that the products can be turned out in greater variety and easily customised with no added cost for small production runs.
Interorganisational systems
Systems linking a company to its customers, distributors, or suppliers are termed interorganisational systems because they automate the flow of information across organisational boundaries. Digital firms use an interorganisational system to establish link with suppliers, customers and sometimes even competitors, and to create and distribute new products and services without being restricted by traditional organisational boundaries or physical locations.
Many of these interorganisational systems are increasingly based on web technology and are providing a more intense sharing of knowledge, resources, and business processes than in the past. Firms are using these systems to work jointly with suppliers and other business partners on product design and development and on the scheduling and flow of work in manufacturing procurement, and distribution. These new levels of inter-firm collaboration and coordination can lead to higher levels of efficiency, value to customers, and ultimately significant competitive advantage.
The changes described here represent new ways of conducing business electronically both inside and outside the firm which ultimately result in the creation of digital firms. Increasingly, the internet is providing the underlying technology for these changes. The internet can link thousands of organisations into a single network, creating the foundation for a vast digital marketplace.
A digital market is an information system that links together many buyers and sellers to exchange information, products, services and payments. Through computers and networks, these systems function like electronic intermediaries, with lowered costs for typical marketplace transactions, such as marching buyers and sellers, establishing prices, ordering goods and paying bills. Buyers and sellers can complete purchase and sales transactions digitally regardless of their location.A vast array of goods and services are being advertised, bought, and exchanged worldwide using the internet as a global marketplace. Companies are creating eye-catching electronic brochures, advertisements and product manuals.
All kinds of products and services are available on the Web, including fresh flowers, books, real estate, music recordings and electronic goods. Even electronic financial trading has arrived on the Web for stocks, bonds and mutual funds.
Electronic commerce
The global availability of the internet for the exchange of transactions between buyers and sellers has fuelled the growth of electronic commerce. Electronic commerce, also known as e-commerce, is the process of buying and selling goods and services electronically with computerised business transactions using the internet and other digital technologies. It also encompasses activities supporting those transactions, such as advertising, marketing, customer support, delivery, and payment.
The internet has emerged as a primary technology platform far electronic commerce. Equally important, internet technology is facilitating the management of the rest of the business publishing employee personnel policies, reviewing account balances and production plans, scheduling plans, pairs and maintenance and revising design documents.
Intranet technology
Companies are taking advantage of the connectivity and ease of the internet technology to create internal corporate networks called intranets. The number of these private intranets for organisational communication, collaboration, and coordination is soaring.
Extranet technology
Private intranets extended to authorised users outside the organisation are called extranets and firms use such networks to coordinate their activities with other firms for making purchases, collaborating on design, and other interorganisational work.
E-business includes e-commerce as well as processes for the internal management of the firm and for coordination with suppliers and other business partners.
E-business can fundamentally change the way organisations perform their work. To use the internet and other digital technologies successfully for e-business, e-commerce, and the creation of digital firms, organisations are required to redefine their business models, change corporate cultures and create closer relationships with customers and suppliers.
Thus, as companies move towards digital organisation, nearly all managers and employees as well as customers and vendors participate in a variety of systems tied together by an information web.
The writer is a freelance contributor
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