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Chapter 3 Information Systems, Organizations, and Strategy 123

THE INTERNET AND ORGANIZATIONS

The Internet, especially the World Wide Web, has an important impact on
the relationships between many firms and external entities, and even on
the organization of business processes inside a firm. The Internet increases
the accessibility, storage, and distribution of information and knowledge for
organizations. In essence, the Internet is capable of dramatically lowering
the transaction and agency costs facing most organizations. For instance,
brokerage firms and banks in New York can now deliver their internal operating
procedures manuals to their employees at distant locations by posting them
on the corporate Web site, saving millions of dollars in distribution costs.
A global sales force can receive nearly instant product price information
updates using the Web or instructions from management sent by e-mail.
Vendors of some large retailers can access retailers’ internal Web sites directly
to find up-to-the-minute sales information and to initiate replenishment orders
instantly.
Businesses are rapidly rebuilding some of their key business processes based
on Internet technology and making this technology a key component of their IT
infrastructures. If prior networking is any guide, one result will be simpler business
processes, fewer employees, and much flatter organizations than in the past.

IMPLICATIONS FOR THE DESIGN AND

UNDERSTANDING OF INFORMATION SYSTEMS

To deliver genuine benefits, information systems must be built with a clear
understanding of the organization in which they will be used. In our experience,
the central organizational factors to consider when planning a new system are
the following:
• The environment in which the organization must function
• The structure of the organization: hierarchy, specialization, routines, and
business processes
• The organization’s culture and politics
• The type of organization and its style of leadership
• The principal interest groups affected by the system and the attitudes of
workers who will be using the system
• The kinds of tasks, decisions, and business processes that the information
system is designed to assist

3.3 USING INFORMATION SYSTEMS TO ACHIEVE
COMPETITIVE ADVANTAGE

In almost every industry you examine, you will find some firms do better
than most others. There’s almost always a stand-out firm. In the automotive
industry, Toyota is considered a superior performer. In pure online retail,
Amazon is the leader; in off-line retail, Walmart, the largest retailer on earth,
is the leader. In online music, Apple’s iTunes is considered the leader with
more than 70 percent of digital music sold worldwide, and in the related
industry of digital music players, the iPod is the leader. In Web search, Google
is considered the leader.

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