What’s Happening?! Oracle take-over attempt of PeopleSoft is not dead. SIA is forecasting a 19% increase in semiconductor sales for 2004. A 30 second ad during the Superbowl cost $2.3 million. 100 Best Places to Work 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. J.M. Smucker, Orville, Ohio Alston & Bird, Atlanta Container Store, Dallas Edward Jones, St. Louis Republic Bancorp, Owosso, Mich. Abode Systems, San Jose TDIndustries, Dallas SAS Institute, Cary, N.C. Wegmans Food Markets, Rochester, N.Y. Xilinx, San Jose 100 Best Places to Work 25 Microsoft 28 Cisco Systems 34 Starbucks 35 Mayo Clinic 46 Intel 48 Network Appliance 55 Qualcom 62 Continental Airlines 72 IBM 78 Intuit 79 Harley-Davidson 84 Marriott International 86 Men’s Wearhouse 90 Granite Construction 91 Texas Instruments 94 International Data Group 96 FedEx 99 Nordstrom 100 Simmons Chapter 7 Summary Implementing a Vision: Strategy, Tactics, and Business Plan Three Key Elements Vision - Identifies what the organization wants to look like at some logical point in the future. Strategy - How a company will achieve the longterm goal of the vision. Tactics - More specific time-oriented, measurable ways to make a vision a reality Two Challenges for a New Business Strategy 1. Deciding what things are worth doing. 2. Getting them done. Elements of a Business Strategy Competitive framework - definition and size of a market including direct and indirect competitors. Market Target – primary buyer or customer segment for product or service. Basis for Perceived Competitive Advantage – how key customers define superior value of a product. Key Profit Drivers – the factors that affect the profitability of a product or service. Product and/or Service Portfolio – relating a product or service with the other four points. The Three Components of a New Strategy Vision Internal Assessment External Assessment A New Strategy Figure 7-1 Environmental Analysis General Environment Operating Environment Competitive Positioning ies t i n rtu ts o p ea Op Thr Directions for Development Company Vision Company Strategic History Current Strategy Stakeholder Analysis Chosen Strategy Vision & Strategy Realized Strategy Company Analysis Structure s Values/Culture Skills Figure 7-2 Resources th ng re St W s se s ne k ea Reprinted with permission from The Strategic Management Blueprint Cambridge, Ma: Blackwell, 1993. Strategic Management Process Managing for Results • • • • • • • • Objectives Authority Responsibility Training Motivation Performance Results Reward Control Figure 7-4 Information-Oriented Infrastructure is key to a Responsive Competitive Strategy Data Management – Providing access to timely, accurate and cost- effective data. User Applications – Support of application to the users in functional and individual support. Voice Management – Effective ways of communication (i.e. E-mail, data access, video conferencing). Network Management – Manage networks to assure high levels of availability and performance. Planning Process – Integrating information systems into the business planning process. Financial Strategy and Organization – How does an organization afford, justify and pay for information systems? A Logical Goal The goal is determine if a business strategy can be more successful through the support of information systems. Possible Exam Questions What factors will influence the selection of the primary strategy? What can be done to facilitate the transition from vision to strategy to tactics? Chapter 8 Introduction Evaluating Business Strategies and The Use of Information Systems: The Strategic Option Generator A Systematic Approach Vision Strategy Tactics Business Plan Competitive Options • Competitive Options • Roles, Roles and Relationships • Redefine and/or Define • Telecommunications as the Delivery Vehicle • Success Factor Profile Chapter Objectives Evaluating Business Strategies The use of the Information Systems to gain competitive advantage Strategic Option Generator A model that can identify strategic opportunities involving the use of information systems STRATEGIC OPTION GENERATOR TARGET TARGET SUPPLIER CUST OMER COMPET IT OR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-1 STRATEGIC OPTION GENERATOR TARGET SUPPLIER CUST OMER COMPET IT OR THRUST THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-1 STRATEGIC OPTION GENERATOR TARGET SUPPLIER CUST OMER COMPET IT OR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-1 STRATEGIC OPTION GENERATOR TARGET SUPPLIER CUST OMER COMPET IT OR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-1 STRATEGIC OPTION GENERATOR TARGET SUPPLIER CUST OMER COMPET IT OR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION EXECUTION STRATEGIC ADVANTAGE Figure 8-1 Analysis of Federal Express Using the STRATEGIC OPTION GENERATOR TARGET SUPP LIER Customer CUST OMER COMP ET IT OR THRUST DIFFERENTIATION COST Differentiation GROWTH ALLIANCE Innovation Growth INNOVATION MODE Offensive OFFENSIVE DEFENSIVE DIRECTION USE Use PROVIDE Provide EXECUTION STRATEGIC ADVANTAGE Figure 8-1 Where Are We? Section I: The Business Environment Chapters 2 – 5 Section II: The Company Environment Chapters 6 – 7 Section III: The Use of Information Systems A Systematic Approach Vision Strategy Tactics Business Plan • Competitive Options • Roles, Roles and Relationships • Redefine and/or Define • Telecommunications as the Delivery Vehicle • Success Factor Profile STRATEGIC OPTION GENERATOR TARGET SUPPLIER CUSTOMER COMPETITOR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-1 Biggest Mistake Target, thrust and mode are fairly straight-forward so they don’t tend to cause problems for students. Direction is a source of problems and confusion since the name of the element is not self-explanatory. This element deals with whom the use of IS is intended. Federal Express Analysis Using the Strategic Option Generator TARGET SUPPLIER CUSTOMER COMPETITOR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-2 UPS Analysis Using the Strategic Option Generator TARGET SUPPLIER CUSTOMER COMPETITOR THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE OFFENSIVE DEFENSIVE DIRECTION USE PROVIDE EXECUTION STRATEGIC ADVANTAGE Figure 8-3 Chapter 9 Introduction The Roles, Roles and Relationships Concept Roles, Roles and Relationships The role of information systems: focused on competitive priorities The role of senior management: positioning and prioritizing the competitive role of information systems The relationship: the need for an effective working relationship between senior management and the information systems organization Senior Management Senior Executive: Communication and direction to the information systems organization of the long term goals of the organization – Making sure that major information systems are properly funded and staffed – Motivating people throughout the organization to make things happen Senior Managers of Major Business Functions Understand the competitive role of information systems within the organization – Identify and specify requirements for new systems – Making sure these new systems are adequately funded through the budget process The Role of the Users of Information Systems Operation level people make things happen! – They need to be motivated by their managers to support the information systems organization and system changes – Without their support a well designed, planned and executed information system can fail The Role of the IS Manager Mission statement: – To assure that the corporation’s present as well as future demands for information, information processes, information systems and computer based technologies are provided for in such a manner that the daily conduct of the business will not be impacted and that the future business opportunities can be capitalized and managed by the corporation. Roles, Roles and Relationships Senior Management Users Functional Management Information Systems Organization Figure 9-1 Making Things Happen! There are three factors that can be identified that cause a business to initiate action in the information systems area: 1. A threat to the business 2. The personal power of a senior manager 3. The need for business process improvements Conclusion The chapter focuses on approaches for making these relationships work and how to capitalize on them. Chapter 9 The Roles, Roles and Relationships Concept Chapter 9 1. Roles, Roles, Relationship Concept and Examples. 2. Triggers of Action. 3. Technology Transfer Through Organizational Learning. 4. IS Organization as a Business within a Business. 5. Outsourcing the management of IS. IS as a Competitive Resource? • Business competitiveness is a top priority. • What about Information Systems? Success Can Be Elusive! Why are some companies successful while others are frustrated with a lack of results and benefits from the use of information systems? Roles, Roles and Relationships 1. What organizational leadership is necessary to gain a competitive advantage through the use of information systems? 2. How does an organization determine the appropriate use of information systems to gain a competitive advantage on an on-going basis? 3. Does a specific event, activity or person tend to trigger the start of a program that emphasizes the competitive use of information systems? Roles, Roles and Relationships 4. Can an organization sustain a competitive advantage that is built on an information system? 5. Is this a broad based approach or is the successful use of competitive information tied to a small number of people playing key roles? 6. Does outsourcing the management of information systems impact its possible use as a competitive resource? How Much is Based On 1. Business Leadership? 2. Information Systems Leadership? 3. A Proven Information Systems Track Record? 4. Business Stability? 5. Information Content of the Business? 6. IS Cost and/or Risk? Specific Roles of Information Systems 1. Business Process Partner. 2. Provide Access to Information. 3. Enhance Communications. 4. Provide Decision Assist. Information systems systems are are strategic strategic Information weapons, not not cost cost centers. centers. weapons, Robert F. McDermott Former USAA CEO Roles, Roles and Relationship Concept *********** 1. The role of information systems is focused on competitive priorities. 2. Senior management plays a major role in positioning and prioritizing the competitive role of information systems. 3. There is an on-going working relationship between senior management and the information systems organization to sustain the successful use of information systems to compete. Two Important Questions 1. Who Makes Competitive Strategy Decisions? 2. Who Makes Competitive Strategy Decisions When the Process is Built on a Computer Base? Top Executive Job Description The primary role of the top executive is to assure the long term viability of the business. The Role of the Senior Executive The Person that Runs the Business on a Day-To-Day Basis • Provide a long term vision for the future of the business. • Recognize the value of information to the organization. • Sponsor and participate in determining the role of information systems. • Communicate the importance of the information systems role. • Provide funding, including R&D, to address the major requirements. • Focus on results and benefits. • Motivate to make things happen! Role of Other Senior Management Understand the role of information systems within the organization. Identify and specify requirement for new information systems. Justify and fund existing and new systems. Sponsor their information systems on an on-going basis. Role of IS Executive Function as a member of the senior management team. Provide an understanding of the realm of the possible, feasible, affordable and achievable with information systems. Posture information systems as a service and support organization in both fact and perception. Using IS to Compete Senior Management Users Functional Management Information Systems Organization Figure 9-1 Roles, Roles and Relationships Leadership in two forms: - Business Leadership - IT Leadership Information Systems Organization Mission Statement To assure that the corporation's present as well as future demands for information, information processes, information systems and computer-based technologies are provided in such a manner that the daily conduct of the business will not be impacted and that the future business opportunities can be capitalized on and managed by the corporation. The Reeducation of UPS Kent “Oz” Nelson ,CEO • For decades UPS focused on managing physical distribution. • Today, new IT and relaxed regulations have made logistics management the imperative. • Information about a package is often as important as the package itself. • In one decade IT went from a limited factor to a critical enabling resource. Using Information Systems to Gain a Competitive Advantage An Essential Partnership Using Information Systems to Compete Senior Management Information Systems Organization Figure 9-2 Relationships 1. A formal structure within the organization. 2. Integral to the way that the business is run. Who Should Be the Primary Initiator of Using Information Systems to Compete? • Senior Management? • Functional Management? • Information Systems Management? Using IS to Compete Primary Responsibilities Direction Conceptual Approach Specific Approach Senior Management 7 2 1 Functional Management 2 5 4 I/S Management 1 3 5 10 10 10 Figure 9-4 Technology Transfer Through Organizational Learning There is a direct correlation between the successful introduction of a new information system within an organization and the learning curve of the primary users. Learning Curves Information Technology Computer-based Applications Organization Making It Happen! Competitive Advantage Action Initiators Crisis Management Process Improvement Executive Power Figure 9-5 You manage things, but you lead people. Grace Hopper Admiral U.S. Navy More on Leadership 1. Entrepreneur Founder 2. Corporate Managers 3. Corporate Caretakers Bob Townsend Up the Organization A Business Products/Services Users Suppliers Board of Directors Competitors Figure 9-6 Information Systems Business Customers Suppliers Steering Committee Competitors Figure 9-7 Steering Committee I/T Needs Real $s Products People Direction Information Systems Organization Wants & Needs Justification Real $s? Products & Services Constraints Costs Users Suppliers Opportunities Competitors Figure 9-8 Outsourcing Hiring someone whose expertise can perform a business function or activity better, more cost effectively and/or in a more timely manner than can be achieved in-house. Also enables the company to focus on its core competencies and those factors that mean the difference between success and failure. Outsourcing Outsourcing is a current, major focus of many business enterprises. It continues to be a very hot topic. Outsourcing Logical? Necessary? Appropriate? Cost-effective? What? With Whom? Where? How Long? How Much Risk? The Evolution of Outsourcing The concept of outsourcing is not new. For decades, companies have outsourced a number of functions such as cafeteria service, janitorial service, security guards, payroll, clerical support, manufacturing and distribution. Outsourcing, by the old definition, was very specific, targeted, and often project based. The company might design a product, then outsource the manufacture of various components, subassemblies, even the finished product. Things have evolved to where anything that is not a core business process is a candidate to outsource. Outsourcing IS Management • A Way to Save Money on a Short Term Basis? • A Way to Avoid the Need to Manage Technical People in an Environment that Keeps Changing? • Strategically Significant? UB example Outsourcing Information Systems Management Is the outsourcing of the management of information systems a contradiction of its possible strategic significance? Information System Goals To help achieve organizational objectives by: 1. Supporting the decision making process. 2. Providing necessary information. 3. Providing a communications network. 4. Accommodating change within the organization. 5. Maintaining an approach with a general manager’s perspective. IS Organization Business 1. Designing Information Systems 2. Building Information Systems 3. Maintaining and Running Information Systems IT Outsourcing Options • Software Development and/or Maintenance • Application Service Provider • Global Network Provider • Network Management • Management of Entire IS Function • IT Training • Consulting and Reengineering India’s IT Outsourcing Industry GOOD STUFF, CHEAP That's the reputation of India's IT outsourcing industry, and it's both a blessing and a curse. The blessing is that India has finally been able to move onto the global stage by harnessing its greatest natural resource— people—and focusing on filling the world's need for IT skills and services. India has grown its IT exports in less than a decade from $150 million to more than $4 billion—10.5% of India's total overseas sales. Its success is built on a solid record for developing IT talent as well as delivering top-notch legacy system maintenance and software applications. India’s IT Outsourcing Industry The curse is that, despite what IT outsourcing has meant for India's economy, the country's top IT vendors have been typecast and they have major competition from Ireland, China, the Philippines and Israel. India’s IT Outsourcing Industry Nobody can beat their price! Software programming in India costs roughly $35 per hour, as opposed to $200 in the United States—and their quality is world-class. Of the 23 companies worldwide that have been awarded the US Software Engineering Institute's Capability Maturity Model Level 5 rating for fault-free software engineering processes (the equivalent of a perfect 10 in Olympic competition), 15 of those elite companies are Indian, among them Infosys, NIIT and Wipro. China Versus India for Outsourcing India’s global advantage in IT rests on a tripartite foundation: 1) Good IT education 2) Competitive wages 3) English language competency. On the first two, China already competes. That leaves English which has improved significantly in the past ten years. US Corporations Most managers are used to managing internal resources and staff directly, and having total control over the decision-making process in their area. There are some fundamental differences in managing an outsourced function. The Corporation Today A company must ensure that internal resources are dedicated to core competencies and that the right outside relationships are established, maintained, and nurtured. Chief Resource Officer (CRO) New Organizational Model is Creating a New Management Role. Outsourcing has rapidly changed and evolved -- from vertical to virtual, tactical to strategic, cost-cutting to cutting-edge. The stakes have increased, the risks and the rewards have soared, yet the manner in which outsourcing engagements are conducted and supervised has remained the same. Chief Resource Officer The CRO is a strategic position, charged not with managing corporate resources (time, money, and personnel), but with managing the complex series of relationships the modern corporation must have with its outside resources. The CRO evaluates the need for resources in each function, finds the resources required outside the company, and implements and nurtures the relationship to the company's best advantage. Chief Resource Manager Outsourcing deals fall apart because there was no one in a Chief Resource Manager position to manage and follow-up on objectives and contractual agreements. A CRO-type position means taking a global, visionary, forward-thinking role in how to use resources and make them effective and efficient for an organization. There is a definite need to manage change during the life of an outsourcing contract. CRO Skill Profile 1. Experience managing different businesses 2. Experience managing costs 3. Project management 4. Contract negotiations 5. Political and cultural consciousness 6. Ability to think out of the box 7. Comfortable with change Evaluation Criteria It is important in considering offshore outsourcing to address the following with a potential vendor: a) Do they have offices in US and in proximity to them. Developing long term products require lot of interaction with the vendor locally. b) Get resumes of IT professionals who will work on your project in foreign country and/or the US. If an offshore vendor has experienced IT professionals working for them for a good length of time, they have good retaining and employee policies. Evaluation Criteria c) Understand the vendor process to develop and deliver the project on a timely basis. d) Get references on where they have successfully completed similar projects. e) Clearly understand the financial and property rights of such a relationship. f) Make sure that you have a way out if things do not go well or according to schedule. Benefits Realized from Outsourcing IS Management Balance Sheet Improvement Cost Reduction Actual Benefits Expected Benefits Improved Quality and Delivery Increased Focus on Core Competencies Vendor Expertise 0% 10% 20% 30% 40% 50% 60% 70% Deloitte & Touche Survey A Well-Structured Alliance • Strategic Synergy. The two (or more) organizations together can achieve a high level of benefits. • Clarity of purpose. The goals and benefits are explicit and clear. • Growth opportunity. The relationship--and its benefits-can be expanded. • Less risk. The relationship reduces the level of risk. • Excellent chemistry. There a good "fit" between the two or more organizations. • Win-Win Proposition. Each party can benefit fairly from the relationship. Outsourcing Resources The Outsourcing Institute http://www.outsourcing.com ASP Outsourcing Center http://www.asp-outsourcing-center.com Some Basic Conclusions 1. There are common factors among companies that have gained a competitive advantage through the use of information systems. 2. The difference between the good examples and the less successful ones is getting bigger.