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Chapter 1 · chapter metadata

Chapter ID
IS-01
Chapter title
Information Systems in Business Today
Unit
Unit I: Information Systems, Strategy, and the Digital Enterprise
Prerequisites
None
Learning objectives
  1. Define an information system and explain why it is more than technology (IS-01.1).
  2. Identify the five components of an information system in a real business example (IS-01.2).
  3. Distinguish data, information, and knowledge, and explain how an information system moves an organization from one to the next (IS-01.3).
  4. Classify common types of information systems by the business activity they support and the people who use them (IS-01.4).
  5. Compare the responsibilities of business professionals and IS professionals in building and using information systems (IS-01.5).
  6. Describe careers, inside and outside the IT department, that depend on information systems (IS-01.6).
Key terms
information system, information technology, five-component model, hardware, software, data, people, process, information, knowledge, transaction processing system, management information system, decision support system, executive information system, enterprise system, collaboration system, business professional, IS professional, chief information officer, systems analyst, technology-enabled career
Topic tags
foundations; definitions; five-component model; data and information; types of information systems; IT roles; careers; Domino's; Starbucks; Target Canada

Chapter text

Plain, current and tied to real companies.

Chapter 1 · opening scenario

Domino's Pizza calls itself the largest pizza company in the world. Most people think of it as a restaurant chain, but how it takes and fills orders suggests something different.

In its results for fiscal 2025, Domino's reported that it "generated more than 85% of U.S. retail sales in 2025 via digital channels and has developed many innovative ordering platforms" (Domino's Pizza, Inc. fourth quarter and fiscal 2025 results). The same release reported global retail sales of over $20.1 billion and more than 22,100 stores in over 90 markets, including 7,186 stores in the United States, most of them owned by franchisees.

On a Friday night, nearly every order arrives as data from an app or website. It must reach the right store, appear on the right kitchen screen, be tracked through delivery, and be counted in the franchisee's sales report and the company's results.

So is Domino's a pizza company or a technology company? The question has a practical answer. Domino's runs on an information system: people, processes, data, software, and hardware working together. This chapter explains why the technology is only part of that system, and why every business graduate will work inside systems like it.

Chapter 1 · IS-01.1 What is an information system? (excerpt)

An information system is a set of interrelated components, namely people, processes, data, software, and hardware, that work together to collect, process, store, and distribute information to support the operations, decisions, and goals of an organization. Put simply, an information system exists to turn recorded facts into something people can act on, whether that is filling an order, coordinating a team, or deciding where to invest.

Two parts of that definition matter most for business students.

First, an information system has a purpose: to help an organization sell products, pay employees, or decide which stores to open. A laptop in a box is not an information system. It becomes part of one only when someone uses it, following a set of steps, to work with data that matters to the business.

Second, an information system includes people and processes, not only technology. This is the key difference between an information system and information technology (IT). Information technology is the hardware and software an organization uses. An information system is IT plus the people who use it and the processes it supports, which is why two companies can buy the same software and get very different results.

Figures

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Figure 1.1 The five components of an information system Five panels in a row, numbered 01 to 05. A bracket over the first three labels them technology: 01 Hardware, devices that capture, process, store, and transmit data (registers, scanners, phones, servers); 02 Software, instructions that tell the hardware what to do (ordering app, accounting system); 03 Data, recorded facts about people, things, and events (product codes, prices, order times). A bracket over the last two says they turn technology into a business system: 04 People, everyone who uses, builds, runs, or manages the system (customers, cashiers, analysts, developers); 05 Process, the steps people follow to do a business task with the system (taking an order, issuing a refund). Lines from all five panels meet a bar labeled information system, which reads: works only when all five work together; a weak component undermines the rest. Technology Turns technology into a business system Hardware 01 Devices Capture, process, store, and transmit data Registers, scanners, phones, servers Software 02 Instructions Tell the hardware what to do Ordering app, accounting system Data 03 Recorded facts About people, things, and events Product codes, prices, order times People 04 Everyone who uses, builds, runs, or manages the system Customers, cashiers, analysts, developers Process 05 Steps to follow How people do a business task with the system Taking an order, issuing a refund Information system Works only when all five work together. A weak component undermines the rest.
Figure 1.1 The five components of an information system. Hardware, software, and data are the technology. People and process turn that technology into a working business system, and a weak component undermines the rest.
Text description (read by screen readers and AI tools)

Five panels in a row, numbered 01 to 05. A bracket over the first three labels them technology: 01 Hardware, devices that capture, process, store, and transmit data (registers, scanners, phones, servers); 02 Software, instructions that tell the hardware what to do (ordering app, accounting system); 03 Data, recorded facts about people, things, and events (product codes, prices, order times). A bracket over the last two says they turn technology into a business system: 04 People, everyone who uses, builds, runs, or manages the system (customers, cashiers, analysts, developers); 05 Process, the steps people follow to do a business task with the system (taking an order, issuing a refund). Lines from all five panels meet a bar labeled information system, which reads: works only when all five work together; a weak component undermines the rest.

Figure 1.2 From data to information to knowledge Three panels in a row, joined left to right by arrows, using the chapter's coffee shop example. Panel 1, data, answers what happened: raw, recorded facts not yet organized or interpreted. Example: "Order 4471, 7:42 a.m., large latte, $5.45, mobile app." Footer: captured by the system. Panel 2, information, answers what it means: data organized and placed in context so it has meaning. Example: "Mobile app orders for lattes doubled between 7:00 and 8:00 a.m. this month compared with last month." Footer: summarized by the system. Panel 3, knowledge, answers what we should do: understanding gained through experience, analysis, and judgment. Example: "When morning mobile orders spike, we need a second barista on the espresso bar at 7:00 a.m. or wait times climb and customers leave." Footer: built by people who decide. A bar beneath all three reads: every level depends on the one below it; garbage in, garbage out. 01 · Data What happened? Raw, recorded facts not yet organized or interpreted Coffee shop example "Order 4471, 7:42 a.m., large latte, $5.45, mobile app" Captured by the system 02 · Information What does it mean? Data organized and placed in context so it has meaning Coffee shop example "Mobile app orders for lattes doubled between 7:00 and 8:00 a.m. this month compared with last month" Summarized by the system 03 · Knowledge What should we do? Understanding gained through experience, analysis, and judgment Coffee shop example "When morning mobile orders spike, we need a second barista on the espresso bar at 7:00 a.m. or wait times climb and customers leave" Built by people who decide Quality at the bottom Every level depends on the one below it: garbage in, garbage out.
Figure 1.2 From data to information to knowledge. An information system captures and summarizes data so that it becomes information; people interpret that information and build knowledge about what to do. Each level depends on the quality of the one below it.
Text description (read by screen readers and AI tools)

Three panels in a row, joined left to right by arrows, using the chapter's coffee shop example. Panel 1, data, answers what happened: raw, recorded facts not yet organized or interpreted. Example: "Order 4471, 7:42 a.m., large latte, $5.45, mobile app." Footer: captured by the system. Panel 2, information, answers what it means: data organized and placed in context so it has meaning. Example: "Mobile app orders for lattes doubled between 7:00 and 8:00 a.m. this month compared with last month." Footer: summarized by the system. Panel 3, knowledge, answers what we should do: understanding gained through experience, analysis, and judgment. Example: "When morning mobile orders spike, we need a second barista on the espresso bar at 7:00 a.m. or wait times climb and customers leave." Footer: built by people who decide. A bar beneath all three reads: every level depends on the one below it; garbage in, garbage out.

Figure 2.1 The five forces and how information systems affect each A navy panel in the center, rivalry among existing competitors, is surrounded by four panels with arrows pointing into it. Each panel names the force, gives an example, and says how information systems affect it. Center, rivalry: how fiercely current firms compete on price, features, and service; example, airlines competing on fares for the same routes; online booking makes prices transparent and intensifies price competition. Top, threat of new entrants: how easily new companies can enter; example, online-only banks entering consumer banking; information systems cut both ways: cloud services lower start-up costs, while large proprietary datasets and network effects raise barriers. Left, bargaining power of suppliers: how much suppliers can raise prices or set terms; example, a sole maker of a key smartphone chip; supplier portals and e-procurement let buyers compare many suppliers quickly. Right, bargaining power of buyers: how much customers can push prices down or demand more; example, shoppers comparing prices on their phones in a store; price-comparison sites and reviews give buyers more information and power. Bottom, threat of substitutes: how easily customers can meet the same need another way; example, streaming video replacing DVD rental; digital products often become substitutes for physical ones. A note at the upper left, industry profits, reads: the stronger these forces are, the harder it is for any company in the industry to earn high profits. A note at the upper right, switching costs, reads: information systems can raise switching costs on purpose, through stored playlists, purchase histories, and saved payment details. Threat of new entrants How easily new companies can enter, e.g. online-only banks How IS affects it Cloud services lower start-up costs; large proprietary datasets and network effects raise barriers Rivalry among competitors How fiercely current firms compete on price, features, and service, e.g. airlines on fares for the same routes How IS affects it Online booking makes prices transparent and intensifies price competition Threat of substitutes Meeting the same need another way, e.g. streaming replacing DVD rental How IS affects it Digital products often become substitutes for physical ones Supplier power How much suppliers can raise prices or set terms, e.g. a sole maker of a key smartphone chip How IS affects it Supplier portals and e-procurement let buyers compare many suppliers quickly Buyer power How much customers can push prices down or demand more, e.g. shoppers comparing prices on phones How IS affects it Price-comparison sites and reviews give buyers more information and power Industry profits Switching costs The stronger these forces are, the harder it is for any company in the industry to earn high profits. IS can raise switching costs on purpose: stored playlists, purchase histories, saved payment details.
Figure 2.1 The five forces and how information systems affect each. Customers, suppliers, possible new entrants, and substitutes all compete with rivals for a share of the value an industry creates. Information systems can strengthen or weaken every force.
Text description (read by screen readers and AI tools)

A navy panel in the center, rivalry among existing competitors, is surrounded by four panels with arrows pointing into it. Each panel names the force, gives an example, and says how information systems affect it. Center, rivalry: how fiercely current firms compete on price, features, and service; example, airlines competing on fares for the same routes; online booking makes prices transparent and intensifies price competition. Top, threat of new entrants: how easily new companies can enter; example, online-only banks entering consumer banking; information systems cut both ways: cloud services lower start-up costs, while large proprietary datasets and network effects raise barriers. Left, bargaining power of suppliers: how much suppliers can raise prices or set terms; example, a sole maker of a key smartphone chip; supplier portals and e-procurement let buyers compare many suppliers quickly. Right, bargaining power of buyers: how much customers can push prices down or demand more; example, shoppers comparing prices on their phones in a store; price-comparison sites and reviews give buyers more information and power. Bottom, threat of substitutes: how easily customers can meet the same need another way; example, streaming video replacing DVD rental; digital products often become substitutes for physical ones. A note at the upper left, industry profits, reads: the stronger these forces are, the harder it is for any company in the industry to earn high profits. A note at the upper right, switching costs, reads: information systems can raise switching costs on purpose, through stored playlists, purchase histories, and saved payment details.

Current facts and figures

Dated, sourced and easy to check.

Numbers carry their year and their source, so students and instructors can verify them. Updating each semester means checking these against the latest release.

Careers closely tied to business information systems
OccupationMedian pay (May 2025)Jobs (2025)Projected growth (2025 to 2035)
Computer and information systems managers$175,140 per year685,80016%
Computer systems analysts$105,850 per year544,4008%

Sources: US Bureau of Labor Statistics, Occupational Outlook Handbook, Computer and Information Systems Managers and Computer Systems Analysts. Figures change each year, so check the current page.

Exhibit 2: Digital share of Domino's sales over time
Fiscal yearReported digital shareBaseSource
FY2009About 20%US store sales via online orderingFY2009 10-K
FY2014 (end of year)About 50%US salesPress release, May 20, 2015
FY2017Over 60%US salesPress release, April 16, 2018
FY2021More than 75%US retail salesQ4 FY2021 results
FY2023More than 85%US retail salesQ4 FY2023 results
FY2024More than 85%US retail salesQ4 FY2024 results
FY2025More than 85%US retail salesQ4 FY2025 results

Excerpt of Exhibit 2. Some years report US sales and others report global sales, so the full table notes the base for every row.

Figure 4.1 Domino's digital share of US sales, FY2009 to FY2025 A bar chart of the digital share of Domino's US sales by fiscal year, on a scale from 0 to 100%, with years spaced to scale from 2009 to 2025. Bar heights show the share the company reported, which is a floor where it said over or more than. FY2009: about 20% (US store sales through online ordering). FY2014, end of year: about 50%. FY2017: over 60%. FY2021: more than 75%. FY2023: more than 85%. FY2024: more than 85%. FY2025: more than 85%. The bars from FY2009 to FY2023 are drawn in slate and bracketed as history; FY2024 and FY2025 are drawn in blue and bracketed as current. Notes say FY2019 and FY2020 are left out because those years were reported only for global sales (more than half), and give the source: Exhibit 2, from Domino's annual reports and results releases. 0% 25% 50% 75% 100% 2009 2014 2017 2021 2023 2024 2025 Fiscal year ~20% ~50% >60% >75% >85% >85% >85% History: FY2009 to FY2023 Current ~ about; > over or more than, as the company reported it. FY2009 counts US store sales through online ordering. FY2019 and FY2020 are not shown: those years were reported only for global sales (more than half). Source: Exhibit 2, Domino's 10-K filings, press releases, and results releases
Figure 4.1 Domino's digital share of US sales, FY2009 to FY2025. The share of US sales placed through digital channels rose from about 20% in fiscal 2009 to more than 85% in fiscal 2023, 2024, and 2025. Years through FY2023 are history; the share has held above 85% since then.
Text description (read by screen readers and AI tools)

A bar chart of the digital share of Domino's US sales by fiscal year, on a scale from 0 to 100%, with years spaced to scale from 2009 to 2025. Bar heights show the share the company reported, which is a floor where it said over or more than. FY2009: about 20% (US store sales through online ordering). FY2014, end of year: about 50%. FY2017: over 60%. FY2021: more than 75%. FY2023: more than 85%. FY2024: more than 85%. FY2025: more than 85%. The bars from FY2009 to FY2023 are drawn in slate and bracketed as history; FY2024 and FY2025 are drawn in blue and bracketed as current. Notes say FY2019 and FY2020 are left out because those years were reported only for global sales (more than half), and give the source: Exhibit 2, from Domino's annual reports and results releases.

Case study

Case Study: Information Systems as Strategy

Domino's Pizza, Inc. (NYSE: DPZ). A decision case students can argue from evidence.

As of October 2, 2026

Figures and events after this date are not reflected. Every number in this case comes from a cited source; check the source before reusing a figure.

Case type
Decision case
Time span
2008 to 2026, with focus on 2009 onward
Estimated time
75 minutes to read and discuss; 60 minutes for the prompting exercise

Chapter 4 · IS-04.2.4 The competitive challenge: aggregators (excerpt, some sentences omitted)

While Domino's built its own ordering system, delivery aggregators such as DoorDash and Uber Eats grew into large marketplaces. They let customers order from many restaurants in one app, and they often supply the drivers. Domino's 10-K says it competes with "order and delivery aggregation companies, which have continued to grow in size and scale in recent years." It also says competition "for both customers and drivers" from these companies "has substantially increased" (FY2025 10-K).

In July 2023 Domino's changed course. It announced a global deal that let US customers order Domino's through the Uber Eats and Postmates apps, with uniformed Domino's drivers making the deliveries. Domino's loyalty program stayed on its own platform (Domino's press release, July 12, 2023).

In April 2025 Domino's added DoorDash, with a nationwide US rollout starting in May 2025. Again, Domino's drivers deliver, and Domino's Rewards stays exclusive to Domino's own e-commerce platforms (Domino's press release, April 2, 2025).

Chapter 4 · IS-04.2.5 The decision (excerpt)

Imagine you lead digital strategy at Domino's in October 2026. The board asks two questions:

  1. Can the technology advantage last? Ordering apps, trackers, and loyalty points are now common in the industry. What, if anything, still sets Domino's apart?
  2. What should Domino's invest in next? Options include pushing customers toward its own apps and loyalty program, leaning further into aggregators for reach, investing in store operations (for example, more accurate ready times), or something else.

Your recommendation must rest on evidence from this case and the concepts in Chapters 1 through 3.

Questions and exercises

Practice that matches the text.

Review questions

Chapter 1, with section IDs to check against.

  1. IS-01.1 What is the difference between information technology and an information system?
  2. IS-01.2 Name the five components of an information system and give a business example of each.
  3. IS-01.3 Explain the difference between data, information, and knowledge using a retail example.
  4. IS-01.4 How does a transaction processing system differ from a management information system?

Decision questions

Domino's case, two of seven.

  1. Q1 Five forces before and after aggregators. Using Exhibit 5, rate each force for Domino's in 2009 and again in 2026. Which force changed most, and what evidence in the case supports your answer?
  2. Q4 Is the advantage sustainable? Ordering apps, trackers, and loyalty programs are now common. Using the test for sustainable advantage, decide which parts of Domino's system are easy to copy and which are hard to copy. Consider the 99% franchise model, the standard PULSE system across stores, and the in-house software staff.

Chapter 1 · applied exercise (excerpt)

Analyzing a real company's information system with a generative AI tool

Purpose: Practice applying the five-component model (IS-01.2) and the data-information-knowledge distinction (IS-01.3) while learning to check AI output critically.

Starter prompt:

You are helping an undergraduate business student. Using the five-component model of information systems (hardware, software, data, people, process), analyze [company name]'s [system name]. For each component, give two specific examples and one thing that could go wrong. Then give one example each of data, information, and knowledge that this system could produce for a manager. Present the five components as a table. Do not invent statistics; if you mention a number, say where it comes from.

Students then check the AI's answer for:

  • Components placed in the wrong category (for example, calling a database "hardware" or calling an app "process").
  • "Information" and "knowledge" examples that are really just data.
  • Claims or numbers about the company that you cannot confirm from a reliable source; treat these as unverified.

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