Though organizational growth is optimal for both small and large companies, it comes with many different challenges. With expansion comes more responsibilities, strategic planning, and the need for better communication.
As a startup evolves from 5 employees to 200, new business units are created to handle specific functions and optimize efficiency. Managers are required to monitor each department to ensure everyone is meeting targets on time. The owner must track competitors who would like nothing more than to lure away customers.
These new requirements make it essential to have an information system in place that uses artificial intelligence to allow employees and managers to communicate, collaborate, and quickly process transactions.
Furthermore, both an evolving and established company can benefit from using different types of information systems that help each unit make structured decisions and enhance problem-solving skills.
Information System Classification:
- Operational Management - Includes transaction processing system, office automation system, and knowledge management system, handles structured data, and used by workers and employees to streamline daily operations
- Tactical Management - Used by business unit managers, handles semi-structured data, and includes management information systems
- Strategic Management - Used by executives, handles unstructured data, and includes the decision support system and executive support system
6 Types of Information Systems
Most businesses utilize six different information technology systems, each with functionality that assists in managing a particular business unit or organizational level.
Because the business environment has a wide range of data requirements, business intelligence technology systems help each department manage and organize all of their data in a manner that helps unit members meet key objectives.
If the data collected by an IS is relevant and accurate, the organization can use it to streamline tasks, pinpoint inefficiencies, and enhance customer service.
Successful companies typically employ six different systems to ensure that every aspect of the organization's data is properly managed and used to improve decision-making and problem-solving.
This allows a company to maintain a competitive edge, find growth opportunities, and keep an accurate audit trail of financial and transactional data for compliance purposes.
Here is an overview of the six types of information systems and how they work-
1. Transaction Processing Systems
A transaction encompasses all of the purchases and sales of products and services, along with any daily business transactions or activities required to operate a company.
Quantities and the types of transactions performed vary, depending on the industry and size/scope of the company. Examples of typical transactions include billing clients, bank deposits, new hire data, inventory counts, or a record of client-customer relationship management data.
A transaction processing system ensures that all of the contractual, transactional, and customer relationship data is stored in a safe location and accessible to everyone who needs it. It also assists in the processing of sales order entries, payroll, shipping, sales management, or other routine transactions needed to maintain operations.
By utilizing a TPS, organizations can have a high level of reliability and accuracy in their user/customer data while minimizing the potential for human error.
2. Office Automation Systems
An office automation system is a network of various tools, technologies, and people required to conduct clerical and managerial tasks.
Typical examples of functions performed by an OAS include printing documents, mailing paperwork, mailing, maintaining a company calendar, and producing reports. Primarily, an office automation system assists in enhancing communication among different departments so everyone can collaborate to complete a task.
An OAS can integrate with e-mail or word processing applications to ensure all communication data is easily accessible and in one centralized location. By utilizing an office automation system, businesses can improve communication between workers, streamline managerial activities, and optimize knowledge management.
3. Knowledge Management Systems
A knowledge management system stores and extracts information to help users enhance their knowledge and optimize collaboration efforts to complete tasks. Examples of documents found in a knowledge management system include employee training materials, company policies, and procedures, or answers to customer questions.
A KMS is used by employees, customers, management, and other various stakeholders involved with the organization. It ensures that technical abilities are integrated throughout the company while providing visuals to help employees make sense of the data they see.
This information system also provides intuitive access to external information required by workers who need outside knowledge to complete their roles. For example, a KMS may hold competitor data that helps a sales team member optimize his/her strategy when pitching to a customer.
Because a KMS shares expertise and provides answers to essential questions, using one can improve communication among team members and assist everyone in meeting performance goals.
4. Management Information Systems
A management information system uses various transaction data from a TPS to help middle management optimize planning and decision-making.
It retrieves TPS information, aggregates it, and generates reports to help those at the management level know important details of a situation. Summaries and comparisons are utilized to allow senior managers to optimize the decision making process to achieve better results.
Most of the report formats encompass summaries of annual sales data, performance data, or historical records. This provides a secure and systemized way for managers to meet their targets and oversee business units.
5. Decision Support Systems
A decision support system processes data to assist in management decision-making. It stores and gathers the information required for management to take the proper actions at the correct time. For example, a bank manager can use a DSS to assess the evolving loan trends to determine which yearly loan targets to meet.
Decision models are programmed into the IS to analyze and summarize large quantities of information and put it into a visual that makes it understandable.
Because a DSS is interactive, management can easily add or delete data and ask important questions. This provides the evidence required for mid-management to make the right choices that will ensure the company meets its targets.
6. Executive Support System
Executive support systems are similar to a DSS but are primarily used by executive leaders and owners to optimize decision-making.
An expert system helps enterprise leaders find answers to non-routine questions so they can make choices that improve the company's outlook and performance. Unlike a DSS, an executive support system provides better telecommunication functionality and a bigger computing functionality.
Graphics software is integrated within an ESS to display data about tax regulations, new competitive startups, internal compliance issues, and other relevant executive information. This allows leaders to track internal performance, monitor the competition, and pinpoint growth opportunities.
Specific Use Cases for Information Systems:
- Enterprise Resource Planning - Provides organization-wide integration of important business activities, handles the allocation of resources to optimize efficiency
- Accounting Information System - Manages all of the accounting information in an organization, including payroll to streamline human resource tasks
- Sales Management System - An information system that manages and monitors all of the sales and marketing data in an organization to streamline each step of the sales process
In conclusion, here are the key takeaways to remember about each type of IS-
- Transaction processing systems TPS handles all of the customer and employee transaction data so an organization can streamline workflows and easily retrieve the required information.
- An office automation system manages all of the clerical and managerial daily tasks in a business to help optimize communication and improve collaboration efforts.
- A knowledge management system handles expertise on a variety of subjects and assists in knowledge-sharing so users can become more informed and enhance their job performance.
- An information system MIS uses processing system TPS data to help middle managers optimize decision-making and monitor performance.
- A support system DSS processes information to help managers make the right choices at the right time.
- An executive system information system manages all of the required information needed for enterprise leaders to monitor the competition, track internal performance, and pinpoint growth opportunities.