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Management Imperatives To Make IT Business-Smart

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Title: Management Imperatives To Make IT Business-Smart


1
Management Imperatives To Make IT Business-Smart
  • A Success Story - Why it Worked?
    Asian Paints vs. Nike
  • Why Companies Dont Get IT
  • A Model for Managing IT - Cisco Case
  • The Cisco Inventory Wreck How Did It Happen?
  • Lessons for Making IT Business-Smart
  • Build or Buy or Rent or Outsource
  • If Cement Can in Mexico, Anyone Can!
    CEMEX Case
  • Summing Up

2
A Big Splash In Wall Street in March
2001...
Nike Says Profit Woes Due To IT Philip Knight,
Nikes Chairman and CEO, blamed the
complications arising from the impact of
implementing our new demand-and-supply planning
systems and processes for the shortages of some
products and excess amounts of others as well as
late deliveries. Result Profits Fell Short of
Estimate by 33 I guess my immediate reaction is
This is what we get for 400 million? Source
Computerworld, March 5, 2001
3
Some Causes for the Nike Problem
  • BIG Global Supply-Chain Project
  • Suppliers in Indonesia, Malaysia, China. A Real
    Challenge
  • High degree of Customization
  • i2s Supply Chain application had to be linked
    with SAPs ERP and Siebels CRM systems
  • Wide range of footwear products in a multitude of
    styles and sizes
  • Complexity in mapping the supply-chain software
    to the companys internal business processes

4
A Success Story Asian Paints IT Funded Global
Acquisitions
  • 20M investment in IT
  • Benefit
  • 80M operating cash flow generated over
    the past 3 years
  • Implemented SCM from i2 before ERP from SAP
  • Inventory Turns 11.6 in 2002 vs. 6.5 in 1998

5
(No Transcript)
6
An Opportunity to be Seized. . .
- Computers used in Business for Nearly
Five Decades - Dazzling Progress in
Technology - Significant Investments in IT
Infrastructure Hardware, Software and
Peopleware
YET . .
Focus on OPERATIONAL SYSTEMS has blurred the
potential of using IT for MANAGING the Business
7
The Bottom Line
  • The power of today's computing technology is not
    being used as it should in most enterprises.
  • - James Martin, The IS Manifesto

WHY NOT ???
8
A Hypothesis
  • Traditional focus on the "4 M's (Money,
    Machines, Markets Men)
  • Hands-off approach to IT
  • HENCE
  • IT is treated as a cost center
  • No real understanding of the potential of IT to
    help achieve business objectives

9
Managerial Implications
CANNOT TREAT IT AS A COST CENTER TO BE
RUN BY TECHNICAL PEOPLE
EXECUTIVE LEADERSHIP IS NEEDED TO ENSURE
  • IT is aligned with Corporate Strategy
  • IT projects are not bogged down in
  • Operational Systems that are required to
    run the business - must pay attention to
  • critical Information Support Systems to
    manage the business

10
Companies That just Dont Get IT!
In the near future, some management guru will
write a book about how executives in the 1990s
spent too much money on IT because they were
afraid to manage it properly. Unsure of what went
on in the black box, they put their trust in
technological experts to deliver business value
from IT investment CEOs dont seem to apply the
same management scrutiny to their IT department
as they do to the rest of the organization. Source
Wall Street Journal, December 12, 1996
11
Why IT is a Black Box to Top Management
Unsure of what goes on within it and not
particularly anxious to find out Do not know
the right questions to ask and the wrong
answers Cannot penetrate the techno-speak of
the IT group
12
Treat IT as a Traditional Business System- Does
Not Require T Knowledge
Typical Business Functions
Customer Service
Business Strategy Planning
ProductDevelopment
Operations
Typical IT Functions
IT Applications Development Implementation
IT InfrastructureOperations
IT Strategy Planning
User Support
IT should be managed like any business system to
deliver value.
13
IT Strategy Planning
  • Business strategy and priorities must guide IT
    investment decisions.
  • IT Budget should channel funds toward critical
    areas e.g., growth of market share, increased
    revenues and overall competitiveness.
  • IT leaders should work from the same agenda as
    their business counterparts.
  • IT leaders must understand the fundamentals of
    business to make decisions based on real
    measures of business value, not politics or pet
    projects.
  • They should have a seat at the table where
    business priorities are set.
  • Business unit heads should be held accountable
    for the performance benefits promised by IT
    projects.
  • In turn, they must have a seat at the table when
    IT strategies are developed.

14
Cisco in 1993 - 500 M Company
  • IT ran traditional order-entry, manufacturing and
    financial systems - basically transaction
    processing systems
  • Software package from vendor CISCO was biggest
    customer
  • IT viewed as a cost center
  • Reported through the CFO
  • Too internally oriented

Result
Contribution of IT to the business was much less
than its potential. Current legacy systems could
not scale to support Ciscos growth nor were they
flexible to meet management requirements
15
Changes Made to the IT Function
  • 1. IT reporting changed from Finance to Customer
    Advocacy department to enable IT to facilitate
    Ciscos Customer Focus strategy.
  • 2. IT budget pertaining to the functions were
    returned to the functions
  • All IT application projects are client-funded
  • 3. Central IT Steering Committee was disbanded
  • All IT investment decisions on application
    projects were pushed out to the line organization
    but executed by the central IT department

For example, if a sales manager has a goal to
grow his sales 50 next year, it is his decision
as to what resources he invests in it to
accomplish his goal. Do I need more salespeople?
Do I create more marketing programs? Or, do I
invest in IT? All the money is in his P L.
16
Cisco in 1998 8.5 B Company
  • IT department has about 1, 000 people (employees
    and non-employees)
  • Operating budget 300 M (excludes telephone
    usage, PC acquisition cost and Engineering
    departments IT expenses)
  • Central management of the T in IT.
  • User decides how much to spend on IT, but not
    which technology is purchased or used.
  • Implemented a 15 M Enterprise Resource Planning
    System to replace all legacy systems worldwide in
    an aggressive 9-month big bang effort (June 94 -
    February 95)

17
Ciscos Approach to IT
  • Philosophy
  • Focus on reducing cycle time and improving
    customer satisfaction in a cost-effective manner
  • IT is integral to the business
  • ITs Relationship with Clients

Our clients manage IT as one of the resources
available to achieve business goals. We jointly
define with our clients the scope of IT projects.
Clients are held accountable for attaining the
business results with their IT investments. We
are held accountable for implementing effective
solutions as defined Companies that achieve a
high degree of business responsiveness and
business integration usually have decentralized
IT they optimize for the business unit but
sub-optimize for the overall enterprise. We have
been able to walk that difficult line between
centralization and decentralization and yet
achieve a very high degree business ownership of
IT decisions and investment.
18
A Key Lesson - How to View IT Investment
In the information age, spending less is no
longer the goal getting benefits and maximizing
cost effectiveness is the goal We manage IT as
an integral part of every function in the
company. Manufacturing decides how much to
invest in IT, and IT becomes part of the COGs
(Cost of Goods). The same thing happens in RD,
sales, finance, marketing and distribution, human
resources, etc. While all this seems pretty
obvious, its amazing the number of companies
that lump most of their IT into GA (General
Administrative) expense, and then manage IT to
minimize the cost as if it were a necessary evil.
19
The Customer is THE Business - Pervades IT
Department Too
I have 150,000 registered Customers hooked up -
those are customers with a big C - compared to
15,000 Cisco employees. In contrast to most
internally focused IT organization in many other
companies, my mission does not primarily focus
on providing services and systems to meet the
needs of the employees of the business. In fact,
I refer to my employee users as clients, and not
as customers. Customers that are using our
systems directly express higher satisfaction with
us, and enjoy a lower cost of doing business
with us than those who do not use our systems.
And, of course, we also lower our cost of doing
business. CIO spends 25 of his time meeting
with customers to brief them on his IT mission,
strategies, organization structure and
applications.
20
IT Application Development Implementation
Top management have a significant role to play in
the oversight of big IT projects cannot
abdicate this responsibility to the CIO
  • Example Ciscos ERP System
  • Installed an ERP System to replace all legacy
    systems worldwide in an aggressive 9-month
    big-bang effort
  • Cisco had NO CHOICEThe legacy systems could not
    scale to the explosive growth of Cisco in the
    early Nineties the crash of the system in
    January 1994 shut the company for two days

21
Key Steps taken by Cisco Management
  • Oversight by Top Management
  • CEO made the project one of the companys top 7
    goals for the year and tracked its progress in
    executive staff meetings, company-wide meetings
    and board meetings
  • Project was Not An IT-only Initiative
  • Hand-picked the best business people to work with
    IT personnel on the project
  • Team of 100 members placed onto one of 5 tracks
    (process areas)

22
Key Steps taken by Cisco Management
  • Implementation Responsibility at Two Levels
  • Executive Steering Committee composed of VPs of
    Manufacturing and Customer Advocacy, CIO,
    Corporate Controller and Senior VPs of Vendors
  • Project Management Office headed by business
    manager overseeing the 5 tracks, each of which
    had a business leader and an IT leader jointly
    overseeing the work of the team

23
The Cisco After - 2.2 B Inventory Write-Off
in Apr 2001
  • How could a posterchild of E-Business, with all
    the publicity about the brilliant integration of
    its systems
  • - the company could close its books in 24
    hours, any day of the year-
  • Not stop building inventory worth billions of
    dollars that could not be sold?
  • The Great Inventory Wreck of Cisco
  • Blamed the economy
  • compared it to an unforeseeable natural
    disaster
  • - Sales plunged 30
  • - 8,500 people laid off
  • - Stock sunk to 13.63 on April 6, 2004,
  • from 82 in March 2000

24
The Demand Chain
Ford
Auto Dealers
Auto Buyers
CISCO
Boeing
Airlines
Air Travelers
Merrill Lynch
Stock Traders
25
Demand Chain Management
  • Shifts in end-stage demand should drive
    production planning and inventory decisions
  • Problem Available information is of varying
    levels of accuracy and time discrepancies
  • B2B firms must understand that the business
    drivers of their B customers are different
    must track these drivers for the 20 key
    customers accounting for 80 revenue

26
Cisco Miscalculated Demand
  • Ciscos customers placed multiple orders on Cisco
    and its competitors during the Year 2000 boom,
    when network gear was hard to come by, even
    though they would ultimately make just one
    purchase from whomever could deliver the goods
    first.
  • Because of long lead times, customers ordered
    more than they needed to, as a sort of insurance
    policy.
  • Ciscos order books did not hence reflect the
    real demand. When the economy slowed down
    abruptly, these orders evaporated.

27
Over-reliance on IT Systems
  • Other networking companies with far less
    sophisticated tools saw the downturn coming, and
    downgraded their forecasts months earlier Cisco
    Did Not!
  • Ciscos highly touted IT systems contributed to
    the fog that prevented it from seeing what was
    clear to everyone else
  • Blinded by their own good press
  • Big Problem with Ciscos State-of-the-Art
    Networked Supply Chain Management Systems
  • Outsources over 70 of its production to
    Contract Mfrs
  • 55 of orders flow from Suppliers to
    Customers without even touching us
  • But No Visibility into the Demand Chain

28
Cisco Compounded The Problem!
  • To lock in suppliers of scarce components during
    the boom, Cisco placed large orders on multiple
    contract manufacturers based on demand
    projections from the companys sales force
    which were artificially inflated.
  • Factories of Ciscos Tier 2 Suppliers are mostly
    located in Southeast Asia, necessitating long
    delivery times.
  • - JIT is really Nearly JIT Shipping Times are
    NOT Real-Time!
  • Just because the faucet was turned off at Cisco,
    the company could not renege on orders with its
    contract suppliers which were placed months
    earlier because of the long lead times.

29
Ciscos Vaunted Management Process Did Not
Measure Up!
  • Inflated sales forecasts from Ciscos customers
    due to the shortage environment in 2000
  • Must have corrective mechanism to adjust for the
    artificial inflation in salespeoples
    forecasts during shortage
  • Dell has a contingency planning model for
    training sales people to get demand estimates
    from B customers
  • Valuable to institute a reward system for
    salespeople to provide good sales forecasts
  • Must track business drivers of key customers
  • 2. Forecasting models based on growth
  • 40 strength quarters of stout growth
  • last 3 quarters of extreme growth (66)
  • No What If analysis if growth assumptions did
    NOT materialize

30
Ciscos Vaunted Management Process Did Not
Measure Up!
  • 3. Models ignored macroeconomic factors such as
    debt levels, interest rates, the bond market,
    etc, that overshadows the entire communications
    industry
  • We never built models to anticipate something
    of this magnitude - CEO admitting to The
    Economist, April 2001
  • 4. Did not encourage key suppliers to share
    market knowledge
  • Ciscos supplier, Solectron, saw a growing
    disparity between what they and their other
    customers thought was happening and what Cisco
    said was happening
  • Can you really sit there and confront a customer
    and tell him he doesnt know what he is doing
    with his business - CIO Magazine, August 1, 2001

31
Ciscos Sense Response Mechanism Missing
during Sept. Nov., 2000
  • By Sept. 2000, Ciscos Tier 1 and Tier 2
    Suppliers were strategizing for a downturn in the
    economy either a V (deep, short but right back
    up) or a longer, more serious U-shaped
    recession
  • But Cisco remained upbeat
  • We havent seen any sign of a slowdown
  • Chief Strategy Officer, Nov. 2000
  • Ive never been most optimisticCEO to
    analysts, Dec. 4, 2000
  • Why did Cisco executives not sense the looming
    problem in the virtual close system?
  • The system forecast a slowdown in Japans economy
    in 9 months before competitors did
  • It enables decision-makers to have real-time
    access to detailed operating data.

32
Ciscos Sense Response Mechanism Missing
during Sept. Nov., 2000
  • Cisco saw the problem a little too late on Dec.
    15, 2001.
  • Actual sales had crossed under its projections in
    the system Decided to seriously curtail expenses
  • 3 weeks later, a hiring freeze was on!
  • What was Cisco doing during Sept. Nov., 2000?
  • Did they not see that the actual sales line and
    the forecast line were converging?

33
Management Imperatives- To Make IT Business-Smart
  • IT spending should be based on the strategic role
    of IT to achieve business goals- Industry
    benchmarks not appropriate
  • Example FedEx vs. UPS
  • Same Annual IT Expenditure 1 B
  • But FedEx Annual Revenue 33 less than UPS
  • Difference due to different IT strategies
  • FedEx Decentralized approach to IT management--
    Focus on flexibility to meet needs of various
    customer segments
  • UPS Centralized, standardized IT environment--
    Dependable customer service at relatively low cost

34
Management Imperatives- To Make IT Business-Smart
  • IT is not little i, Big T
  • Information is a critical resource that can
    provide competitive advantage to the business.
  • Examples Frito-Lay, Elf Atochem.
  • Senior management should recognize the potential
    of the I in IT and play a leadership role in
    bringing about organizational change to make use
    of better information in the firms management
    process.
  • Upgrading the I will be all costs and no
    benefits unless it is used to upgrade the
    management process, with the help of the I,
    which is more difficult and requires push from
    top management

35
Management Imperatives- To Make IT Business-Smart
3. Priorities for IT projects should be set by
top management in line with business imperatives.
  • Example Which comes first ERP or SCM or CRM?
  • Frito Lay CRM first
  • Asian Paints SCM first
  • Nike Hershey All three together
  • Owens Corning ERP first,
    but had to seek bankruptcy protection

36
Owens Corning put ERP Before CRM
  • You have to have your internal transactions,
    your base transactions in place before you
    automate anything to the end-customer CIO
  • ERP package from SAP costing 280 M took 7 years
    to implement replaced 200 disparate systems
    with a single platform to support operations of
    multiple SBUs in multiple countries
  • Got the CRM system from SAP as part of the
    package but everything was being sunk into
    CORE business systems. CRM didnt sink in as a
    priority at the time.
  • Today the CIO concedes that the firm should have
    focused more on what customers wanted instead of
    working only on getting its internal processes
    right. We should have spent more time working
    with the customer and gone backward from there.

37
Management Imperatives- To Make IT Business-Smart
4. Head of IT should be business savvy and be an
equal among peers in the boardroom CIO is not
just a change of title
38
Management Imperatives- To Make IT Business-Smart
5. The T should be centrally managed by the
CIO to realize significant cost savings and
strategic benefits that come from centralizing IT
capabilities and standardizing IT infrastructure
across an organization
  • Leverages T expertise across the company
  • Enables large and cost-effective contracts with
    T suppliers
  • Facilitates global business processes

Caveat Limits the companys responsiveness to
differentiated customer segments and is resisted
by business unit heads
39
Management Imperatives- To Make IT Business-Smart
6. Business leaders should play a significant
role in oversight of IT projects, especially the
big projects AND be accountable for realizing
the anticipated business benefits.
  • A new IT system alone has little value unless it
    is coupled with a new or redesigned business
    process, which entails change in the organization
  • CIO is responsible for delivering systems on time
    and on budget, with the potential to be both
    useful and used, but NOT the organizational
    changes needed to generate business value from a
    new system

40
The Buy Option
  • System would be available sooner than the Build
    option
  • Management time to design a custom system saved
  • BUT Would the standard reports meet user needs?
  • IF NOT
  • Custom changes can be done only by the vendor -
    cost will depend on of hours billed at the
    hourly consulting rate
  • MORE IMPORTANT
  • All commercial software packages assume
  • Data is a GIVEN !
  • IN REALITY Data is a BIG issue

41
Test Drive the PackageBefore Buying It
  • Vendor should give an evaluation copy of the
    software which should be used for a trial period
    of 3 - 6 months to check
  • Does the promised functionality actually exist?
  • Does the product work in our technical
    environment?
  • Is it really easy to use the product?
  • ... Does it involve significant end-user input?
  • Does it work with our data? A make or break
    issue
  • Can it handle our full data load?
  • (Simulate the full data load)
  • How well does it meet our performance metrics?
  • Is the per-user cost worth the value?

42
The Build Option
  • Can customize to meet user's specific information
    needs
  • Data to be captured in the system will, hence, be
    tailored to generate the information needed no
    more, no less.
  • Data issues will be identified during the
    building process
  • User group can trade-off the effort for
    collecting data and the value of that data in the
    report generated
  • Enhancing the system can be done in line with
    users needs
  • Users control the destiny of the system !
  • A Big Problem with the BUY Option
  • When the Vendor upgrades the software, the
    Customer HAS TO UPGRADE, even when the customer
    does not want the enhancements

43
A New Model Rent Software- Software-as-a
Service (SaaS)
Salesforce.com A Pioneer to Offer CRM
Software through the Web - Launched in 2000 by
Marc Benioff, a Silicon Valley veteran, who rose
through the ranks at Oracle doing sales,
marketing and product development to become a
prominent executive - and one of the youngest
in the 1990s - An initial backer of Siebel
Systems - Made over 20 M from his 1993
investment - Goal Put Siebel Systems out of
business - Cost of Software Flat 50 Fee
Per User Per Month
44
Benefits of SaaS
  • - Scalable Hire more people, pay more
    Lay people off, pay less
  • - No Investments in Hardware or IT Staff
  • All Computing takes place on
    Salesforce.com machines
  • - No Upfront Licence Fees for Software
  • - Time savings in Software Installation
  • - Software Upgrades Do not have to start from
    scratch
  • - Users can access through a web browser,
    wherever they are
  • Rival SaaS Startups
  • - RightNow Technologies, NetSuite,
    SalesNet
  • Siebel Followed Suit in 2002
  • - On-Demand CRM with IBM 60 fee !

45
Why Not Just Outsource IT?
  • Rationale for Outsourcing
  • IT is not a core competency of the business
  • Outsource to IT service providers who excel in
    that
  • Possible cost savings, especially for offshore
    outsourcing
  • AND
  • No headaches of managing IT!
  • BUT There are Risks
  • Service providers may not be flexible to meet
    changing business needs
  • Vulnerable if the provider fails to meet
    contractual obligations

46
Mutual Life Insurance of New York (MONY)- A Case
of IT Out and Back
  • 1995
  • Outsourced the IT function staffed by 240 people
    to Computer Sciences Corp
  • Objective to update MONYs IT architecture while
    controlling costs
  • 1997
  • CEO brought IT back in-house
  • MONY faced intense pressure from banks and other
    aggressive competitors which necessitated radical
    changes in MONYs business strategy that required
    a variety of new systems
  • CEO was diffident about the suppliers ability to
    keep up with MONYs needs
  • IT staff expanded by 37
  • IT budget up 60 M in 1998 vs. 42 M in 1997

47
Cemex - One of the Worlds Digital Innovators
An extraordinary anomaly - Cement A highly
unpromising industry -- Commodity-based
Asset-intensive -- Low growth Low profit
margins -- Unpredictable demand --
Uncontrollable environmental factors -
weather, traffic jams, government policies, -
An Old Economy Company Founded in 1906 -
Location Hidalgo, Mexico - Middle of Nowhere
-- Not near Silicon Valley, Seattle, Boston,..
-- No special advantages in terms of talent base
or high-tech infrastructure. Cemex plant
outside Mexico City was in a town with
only 20 telephone lines
48
Cemex Today.. - Worlds third largest cement
manufacturer -- Has plants in 30 countries
-- Sales in 60 more countries -- More
profitable than either Frances Lafarge
or Switzerlands Holcim - A blue-print of a
smart business model -- Added a brilliantly
integrated layer of IT to an
asset-intensive low-efficiency business -- In
todays digital age, anyone can play! -
Essentially built a bits factory to complement
and support the atoms factory
49
The Beginning - A New CEO in 1985 Business
Issues 1. An overly diversified company -
Also owned hotels, petrochemical plants, mining
companies, etc 2. High volatility of the
Mexican economic and financial systems 3.
Price pressure from more efficient multinational
companies 4. Growing competition from new
low-cost Asian companies A number of factors
could be listed in the excuses section of the
CEO letter in the annual report. But the new CEO,
grandson of the founder and a Stanford MBA,
preferred to change the rules of the game!
50
The Transformation. - Started by divesting
almost all the non-cement businesses - Hired a
Wharton MBA to serve as Chief Information




Officer Powerful partnership was THE key -- A
CEO attuned to the strategic value of IT -- A
CIO with a genuine understanding of
business
51
Delivering Ready-mixed Concrete -A Tough
Business Anywhere! - A logistical nightmare to
get mixer trucks from the plants



to the building
sites at the right time -- cement has to be
poured within 90 minutes of mixing.


-
Especially so in Mexico-- wild weather, traffic
gridlock, work stoppages and arbitrary
government inspections may hit at any time--
And, customers (contractors at the site) who are
always changing their orders - 50 of orders
are cancelled or rescheduled or changed (vs
5 change rate at a US Cemex affiliate) - Cemex
tried to force customers into predictability --
Required orders 24 hours in advance -- Imposed
price penalties for change - Still, could
promise delivery only within 3 hours
52
Starting Point Who Else has Solved Our
Problem? - Benchmark the Best World-Class
Practices Fed-Ex - Customers never provide
forecasts - Achieved unparalleled speed and
reliability of delivery of packages to
millions of destinations around the world, using
Memphis as a hub. Exxon - Tracking, scheduling
and rerouting oil shipments - Global fleet of
tankers, at the mercy of ocean weather, military
and


political
unrest, was efficiently managed Houston 911
Center - Coordinates hundreds of ambulances,
fire and police vehicles in



response to unpredictable,
often life-threatening, emergency calls - Deal
with city traffic, inaccurate addresses and
incomplete information
53
Common Thread in the Three Companies.. They
had developed systems for quickly and accurately
capturing, responding to, and sharing information
about their customers needs. As a result, they
were able to substitute management of information
for deployment of costly assets such as trucks,
ships and employees - BITS in place of ATOMS.
54
The IT-Enabled Solution CEMEXNET, a
satellite system for communications (1987 - 89)
- Connected 11 Cemex cement factories in Mexico
and 175 mixing plants with central
operations center - Central coordination of
supply and demand instead of each plant
operating independently - Central dispatching
system for routing of 1500 trucks
previously each plant had its own fleet of trucks
Computer terminals installed in every
delivery truck with Global Positioning Satellite
(GPS) systems - Could dispatch the right truck
to pick up and deliver a particular grade of
cement (8000 products) - Reroute the truck when
the chaotic traffic conditions delayed
delivery - Redirect deliveries from one customer
to another if last- minute changes were made
55
Expert System - For Smarter Decisions - To
project order rates by day, hour and location
-- improved predictions as the data grew -
Customer site of the incoming order is
triangulated against the mixing plants and
delivery trucks scattered throughout the
city - Best combination selected based on
traffic, pouring conditions and the pattern
of predicted orders
56
The Payoff... - Reduced the 3-hour delivery
window for ready-mix concrete to 20 minutes
with reliability of over 98. Goal 10
minutes. - Fewer lost orders because the phone
systems arent tied up - Uses 35 fewer
trucks -- Less inventory in transit --
Large savings in fuel, equipment maintenance
and payroll costs.
57
Cemexs Unique Value Proposition To Its
Customers - Rapid Responses -- Order changes
and same-day delivery are standard service -
Reliability -- Worry less about late deliveries
-- Avoid huge costs of idle workers in case of
late deliveries - Guarantee -- If the truck is
late by over 20 minutes, buyer gets rebate
of 5
58
New Technology is Nothing Without New
Attitudes ... - Dispatchers were told You
are no longer scheduling you are committing. -
Compulsory computer and customer-service training
for drivers (with an average schooling of 6
years) -- Six hours at half-pay -- every Sunday
for 2 years - Changing of old work rules --
Unions consented on the promise that more
efficient trucks meant higher pay.
  • It is better for the Company as well as for us.
    As a matter of fact, we are the Company.
    (Salvador Lamas, a truck driver and union leader)

59
Today IT is a Separate Business - Spun
off the internal IT department, Cemtec, and
joined it with 4 other Spanish and Latin
American firms in 2000. -- Created Neoris, an IT
consultancy - Neoris is now part of CxNetworks
-- a Miami-based subsidiary that Cemex wants
to use to turn itself into an e-business -
Launched under CxNetworks -- Construmix a
construction industry online marketplace --
Latinexus an e-procurement site
60
Effective Management StrategiesUsed by CEOs Who
Get IT!
  • Operational Strategy
  • Should have a clear view as to how the company
    must operate differently once the investment in
    IT is in place
  • Emphasis on Key Processes
  • Concentrate IT investments to support
    re-engineering of key processes such as using the
    Net to connect with customers and suppliers or
    helping people at all levels do their jobs more
    effectively through information support systems

61
Effective Management StrategiesUsed by CEOs Who
Get IT!
  • Effective Governance
  • Make the CIO a member of the top management team
    so that the CEO and CIO are in touch on a weekly,
    if not daily, basis.
  • Or, set up an effective IT steering committee
    with the CEO or COO, CIO and the heads of
    business units that meets periodically to set IT
    direction within the context of the business
    strategy and balance company-wide and business
    unit IT needs
  • Line Managers Should Get IT
  • Make IT education a part of the management
    training program to ensure line management at all
    levels view IT as a competitive weapon, not as a
    cost
  • Encourage efforts to use IT effectively, monitor
    and reward them
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