Job creation incentive program seems to have backfired financially on the state of California.

1
Whats Happening?!

• Job creation incentive program seems to have
  backfired financially on the state of California.

Three California congressmen are questioning the
sale of IBMs PC manufacturing to a China company
based on national defense concerns.
SBC is negotiating to buy ATT for 16 billion.
2
Whats Happening?!

• Knight-Ridder advertising revenue for 2004 was
  648
• million. Newspaper revenue was 747 million.
  Online media
• revenue was 31 million.

Oracle expects higher profits. Seeks closer ties
with IBM.
New university Cal State East Bay.
3
Chapter 6 Summary

• Business Vision

4
Chapter Objectives

• Positioning vision as the starting point in
  directing, posturing and running a business.
• Understanding the significance of the vision
  process.
• Remembering that vision triggers the entire
  business and information technology management
  process.

5
What is a Vision?

• A photograph of the future
• It must be realistic and credible -- and most
  certainly attractive to the organization
• Concrete and easily understood ideas about the
  long-range future of the business

6
What Must Be Accomplished

• Establish a clear vision of the future.
• Provide a basis for sharing values and views.
• Send a message regarding the importance of the
  vision process throughout the entire organization
  to gain consensus and momentum.
• Make things happen! Action needs to become a
  high priority.

7
Implementation (Action)
The Vision to Action Process
Agreement Commitment
Tactics and Business Plan
Strategy
Feedback
Vision
Sensing Opportunity
8
Vision Uncertainty

• The dynamics of the market
• Rapidly changing technologies
• The logic and need to address changing employee
  values and traditional methods
• The shift from old regulatory practices to new
  practices in many industries

9
Customer Service

• Frequently Drives the Vision!
• For USAA, General McDermotts four step process
• Automation
• Lower employee attrition
• Improve job training
• Decentralize decision making by empowering
  employees

10
USAA

• Role and significance of IT?
• An executive partnership
• Technology experimentation and assimilation
• Leveraging of information systems
• Strategic architecture
• Horizontal integration of applications.

11
Whirlpool

• Decided that it would become the global leader in
  
• the large appliance industry.
• Initially identified product technology and
• procurement as key factors to realize this goal.
• Added information systems as an essential third
• factor to achieve this goal.

12
Conclusions

• Successful companies are the result of good
• leadership.
• Talented leadership is demonstrated in the
  following
• forms
• Determining the direction of the business.
• Promoting the need for action.
• Fostering an environment for well directed
  information systems.

13
Possible Exam Questions

• What factors influence the creation of a vision?
• What impact does a vision have on information
  systems?

14
Chapter 7 Introduction

• Implementing a Vision
• Strategy, Tactics and Business Plan

15
Chapter Objectives

• Provide an understanding of how to transition a
  vision into reality through strategy, tactics,
  and business plans.
• Better appreciate how strategies should dictate
  the role and significance of information systems.
• Understand challenges that a company faces in
  formulating appropriate strategies.

16
Chapter 7 In Just One Slide!
The Four Components of Possible Business Success

• Vision What the company wants to look like in
  the future.
• Strategy Ideas on how to accomplish the vision,
  by doing an external and internal analysis of the
  company.
• Tactics The specific, time-oriented method of
  implementing the decided strategies.
• Business Plan The plan for allocating company
  resources. (aka Operating Plan or Budget)

17
Elements of a Business Strategy

• Competitive framework What market are you in?
  How big is it? Who are your competitors, and
  what are their strategies?
• Market target What type of customer are you
  selling to? What are their needs, attitudes, and
  priorities?
• Basis for perceived competitive superiority How
  do your customers define your product or service
  as superior?
• Key profit drivers What makes your product or
  service profitable?
• Product portfolio Interrelating a product or
  service with the above four points.

18
Business Strategy Challenges

• Is the strategy consistent with our vision?
• Is the scope of strategy right?
• Is there are logical balance between short term
  and long term objectives?
• How does this compare to the industry leader?
• How aggressive should the strategy be
  implemented?
• Do people skills exist and are they availability?
• Are capital and operating funds available?

19
External Analysis
Internal Analysis
20
Example Progressive Corporation

• Vision
• Reduce the economic cost and human trauma of
  automobile
• accidents and provide services that delight
  consumers.
• Plan of Action
• Make major changes to the definition of their
  business and
• financial objectives.
• Align core business strategies based on these
  changes.

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Business Plan

• The most straight-forward part of the entire
  process.
• Deals with allocation of funds, people and other
• resources.

23
IT Based Strategies
MARKET PLACE
OPERATIONS
Federal Express USA Today Charles Schwab
Whirlpool Xerox
SIGNIFICANT STRUCTURAL CHANGE
BancOne Boeing Frito-Lay Wal-Mart
USAA L.L. Bean McKesson
TRADITIONAL PRODUCTS AND PROCESSES
Figure 7-6
24
Plan for Action!

• As has been emphasized the point of all of this
  is to
• make things happen. Key to such an effort
• Simple Strategy
• Aggressive Implementation

25
Conclusions

• Business strategies can frequently work without
  information systems support.
• IS support can be a key enabler of a successful
  business strategy.
• IS implementations wont contribute to the
  success of the company unless the right
  strategies are in place.
• In the current business environment, identifying
  and implementing the best possible strategies
  often faces major challenges.

26
Chapter 7

• Implementing a Vision
• Strategy, Tactics and Business Plan

27
If we know where we are and something about
how we got there, we might see where we are
trending--and if the outcomes which lie naturally
in our course are unacceptable,to make timely
changes. Abraham Lincoln
President of the United States
28
Primary Business Challenges

• Deciding what things are worth doing.
• Getting things done!

29
If the strategy is a hammer, the tactic is a
nail. The actual end results are accomplished by
the nail. If the nail isn't hammered correctly
then the battle is lost. Sometimes the hammer
also misses the nail.
30
Be Careful

• Do not confuse strategies with vision.
• It can be relatively easy to come up with a
  vision.
• The challenge is to turn it into reality through
  appropriate strategies and tactics.

31
Global Management

• Managers must be prepared to engage in heightened
  
• international competition and have the ability
  to
• Manage organizations in different cultural
  settings.
• Establish a value system within the organization.
• Market products in different countries.
• Adapt to changing markets.
• Develop appropriate strategies dealing with
  finance, accounting, manufacturing, marketing and
  management of the organization.

32
Defining the Process Elements

• Vision Identifies what the organization wants to
  look like at some logical point in the future.
• Strategy How a company will achieve the
  long-term goal of the vision.
• Tactics More specific time-oriented, measurable
  ways to make a vision a reality.
• Business Plan Allocation of funds and other
  resources.

33
When in Doubt
Whether dealing with vision, strategies or tactic
think customer!
Remember that a major difference between
companies is how they treat their customers.
Also the importance of doing necessary homework
on competitors.
34
Porter Strategy Guidelines

• Primary Strategies
• Differentiation
• Least Cost
• Supporting Strategies
• Innovation
• Growth
• Alliances

35
Business Strategy Model Guidelines
1. What products and/or services do we intend to
offer? 2. What price range of products do we
intend to offer? 2. What customer targets do we
intend to pursue? 3. What geographic markets do
we intend to address? 4. How will we obtain
products to sell to our customers? 5. How will we
deal with sales to our customers? 6. What company
structure do we intend to create? 7. What
information systems approach will we take?
36
Important Strategy Options

• Focus versus breadth
• Regional, national and/or selectively global
• Products
• Services
• Markets
• Business processes
• Business partners
• Innovation
• Cost
• Speed to market

37
Focus Challenges

• The grass is always greener.
• Failure to see important changes in markets or
  product areas.
• The constant need for revenue and profit growth.
• The difficulty in self-renewal of the base
  business.

38
Great Focused Companies

• Southwest Airlines
• Wal-Mart Stores
• Dell

39
More Strategy Challenges

• One of the most difficult things in developing
  appropriate
• strategies is competitive analysis.
• Good companies develop strategies that are
  believable,
• executable and achievable.
• Good strategies spell out multi-year plans the
  market segments to be pursued, market share
  numbers that
• must be achieved, expense levels that must be
  managed and
• resources that must be applied.
• These must be reviewed regularly and become the
  driving
• force behind everything that the company does.

40
Base for Execution

• Strategic clarity.
• High performance culture.
• World-class processes.

41
Strategy Clarity

• Clearly communicated understanding of this is
  based on the vision for the company.
• Here are the core business strategies and this
  is how you should carry out your job.
• Superb execution is more about values and
  commitments.
• Successful execution comes from belief and
  conviction and not from procedures.

42
Business Strategies!?
How important are they, really?
Do business strategies really make a difference
between success and failure of a company?
43
Need to ask the following questions

• What is driving competition in our industry or
  one that we might enter?
• What actions are competitors likely to take and
  what is the best way to respond?
• How will our industry evolve over time?
• How can we be best positioned to compete in the
  long run?

44
Strategy Consistency?

• Internal Factors
• Resource Factors
• Environment Factors
• Communication and Implementation Considerations

45
Strategy Consistency?
Internal Factors Are the goals achievable? Do
key operating policies address the goals? Do key
operating policies reinforce each other?
Resource Factors Do the goals and policies match
the resources available to the company relative
to competitors? Does the timing of the goals and
policies reflect the companys ability to change?
46
Strategy Consistency?
Environment Factors Do the goals and policies
exploit industry opportunities? Do the goals and
policies deal with industry threats that are
possible with available resources? Does the
timing of the goals and policies reflect the
ability of the environment to absorb the planned
impact. Are the goals and policies consistent
with societal concerns?
47
Strategy Consistency?
Communication and Implementation
Considerations Are the goals understood by the
implementers? Is there congruence between the
goals and policies and the values of the
implementers to insure commitment? Is there
sufficient management capability and availability
to assure effective implementation?
48
Competitive Strategy Process
A. What is the company doing now? Current
strategy? Assumptions about the companys
relative position, strengths and weaknesses,
competitors and industry trends.
49
Competitive Strategy Process
B. What is happening in the business environment
(industry). Validity of industry opportunities
and significance of threats. Key factors for
competitive success. Capabilities and
limitations of existing and potential
competitors. Company strengths and weaknesses
relative to present and future competitors?
50
Competitive Strategy Process
C. What should the company do? Test the
assumptions and strategy. Consider alternative
strategies. Chose the strategy that best relates
to the companys situation relative to external
opportunities and threats.
51
IEA
Internal External Action
52
Progressive Corporation

• 1988 Performance
• Record Revenue
• Record Earnings
• Outstanding Company Culture
• Highly Respected Business Leader
• Well Regarded Company
• Could Things Possibly Be Better?

53
Progressive Corporation

• 1989 Impact
• Voters Passed Proposition 103 in California
  Resulting in 52 Million Being Put into an Escrow
  Account.
• Allstate Gained a Larger Market Share in
  Progressives Niche Market for the First Time.

54
Progressive Corp. Business
Progressive decided that it was really in the
business of reducing human trauma and economic
costs of auto accidents.
55
Progressive Corp. Vision
We seek to be an excellent, innovative, growing
and enduring business by reducing the human
trauma and economic costs of auto accidents in
cost-effective and profitable ways that delight
customers.
56
Progressives New Business Strategies

• A New Definition of the Business.
• Establish Lower Profit Margin Objectives.
• Pursue a Broader Auto Insurance Market.
• Provide Consumer Access to Policy Rates.
• Provide Policy Information to Customers.
• Guarantee Policy Renewal.
• Utilize Multiple Distribution Channels.
• Promote Company Identity.

57
Progressives New Business Strategies

• Curtail Diversification.
• Reduce Operating Expenses.
• Assign Business Process Ownership.
• Establish a New Employee Compensation System.

58
IS Support of New Strategies

• Express Quote Service.
• Immediate Response System.

59
Vision, Customer Value Proposition, Core Values
and Objectives
Progressive Vision We seek to be an excellent,
innovative, growing and enduring business by cost
effectively and profitably reducing the human
trauma and economic costs of auto accidents and
other mishaps, and by building a recognized,
trusted, admired, business generating brand. We
seek to earn a superior return on equity and to
provide a positive environment which attracts
quality people who develop and achieve growth
plans.
60
Progressive
Customer Value Proposition Our customer value
proposition provides a litmus test for customer
interaction, relationships and innovation.
Fast, Fair, Better Thats what you can expect
from Progressive. Everything we do recognizes
the needs of busy customers who are
cost-conscious, increasingly savvy about
insurance and ready for easy, new ways to quote,
buy and manage their policies, including claims
service that respects their time and reduces the
trauma and inconvenience of loss.
61
Progressive
Core Values Progressives core values are
pragmatic statements of what works best for us in
the real world. They govern our decisions and
behavior. We want them to be understood and
embraced by all Progressive people. Growth and
change provide a new perspective, requiring
regular refinement of core values.
62
Progressive Core Values
Integrity We revere honesty. We adhere to high
ethical standards, report precisely and
completely, encourage disclosing bad news and
welcome disagreement.
Golden Rule We respect all people, value the
differences among them and cope with them in the
way we want to be dealt with. This requires us
to know ourselves and to try to understand others.
Objectives We strive to communicate clearly
Progressives ambitious objectives and our
peoples personal and team objectives. We
evaluate performance against all these
objectives.
63
Progressive Core Values
Excellence We strive constantly to improve in
order to meet and exceed the highest expectations
of our customers, shareholders and people. We
teach and encourage our people to improve
performance and to reduce the costs of what we do
for customers. We base our rewards on results
and promote on ability.
Profit The opportunity to earn a profit is how
the competitive free-enterprise system motivates
investment to enhance human health and happiness.
Expanded profits reflects our customers and
claimants increasingly positive view of
Progressive.
64
Peter Lewis
Currently Chairman of the Board We sell speed,
not insurance.
Glenn Renwick, President and Chief Executive
Officer Raymond Voelker, Chief Information Officer
65
IS Exec Identity Crisis
My world collapsed recently during a strategic
planning meeting between the information systems
organization and our marketing department.
How can we in IS help you to realize your
goals? asked the IS Director. This seemed like
a good open-ended question, and I was waiting for
the vice-president of marketing to embrace IS in
his confidence. We were prepared to act as a
full business partner with the marketing
department.
Beyond capacity planning for your computers, I
dont know how you can help. Im not even sure
what your role is in all of this replied the VP
of Marketing.
66
Information Technology Impact
Information Technology
Work
Information
Organization
People
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Information Technology Impact
Semi-automated batch system (out-dated)
Increased complexity for route salesman and plants
Information Technology
Work
Information
10 day information float
Organization
People
Route Salesman
Regional Competitors
68
Information Technology Impact
Communications Network and Hand-held Computer
Increased complexity for route salesman and plants
Information Technology
Work
Information
Reduced information float to 24 hours
Organization
People
Route Salesman Account Specialist Merchandiser
Decentralized Marketing Organization
69
Yum! Brands
KFC Pizza Hut Taco Bell Long John Silver All
American Food (AW)
Created as Tricon Global Restaurants on October
6, 1997 as a spin off from Pepsi.
70
Yum! Brands
The worlds largest quick service restaurant
company with more than 33,000 units in more than
100 countries involving 840,000 employees. 36
are outside the US
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Long Term Goals

• To be the premier global restaurant company.
• Transform the Quick Service Restaurant industry
  with multi-branding.
• Become the best restaurant company investment.

73
Business Strategies

• Drive International Growth
• Multi-brand Great Brands
• Improve Operations of Brand Portfolio with
  Customer Mania

74
International Growth
In 1992 McDonalds had 4,000 international
restaurants. Today it has over 16,000 with a 1
billion profit from these operations.
Yum! has 11,800 (6,800 KRC and 4,400 Pizza Hut)
with nearly 400 million in international profit.

Burger King is third with a profit of 50 million.
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76
International Growth Focus
Seven countries but China, UK, Mexico and Korea
will receive most of the capital investment with
an objective of opening 1,000 new international
units.
China currently has 800 KFCs and 100 Pizza Huts
with plans to open 200 new units per year.
65 of this growth will be through joint venture
partners and franchises.
77
International Challenges

• Customer food preference and taste.
• Standard of livingproduct cost.
• Currency fluctuations.
• Brand strength and unit consistency.
• Distribution system.
• Building an international team for the company.

78
Multi-branding
McDonalds has been the envy of this industry
since its units average 1.6 million a year
(almost twice that of Yum!)
Multi-branding gives customers more choices and
variety.
Typically, sales rise at least 20 when a second
brand is added to another Yum! brand. Has added
100,000 to 400,000 to a unit.
Pasta Bravo will be tested as a multi-brand with
Pizza Hut.
40 of multi-branding is being done by
franchisees.
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81
The Three Components of a New Strategy
Vision
Internal Assessment
External Assessment
A New Strategy
Figure 7-1
82
Strategy Considerations

• Competitive Environment
• Market Target
• Basis for Perceived Competitive Advantage
• Key Profit Drivers
• Product and/or Service Portfolio

Hello, Porter Competitive Model!
83
Strategy-to-Tactics Implementation

• Defining the range of business that the company
  will pursue.
• Responding in an appropriate and timely manner.
• Delegating of responsibilities for formulating
  specific strategies to people who are closer to
  the demands of the customer and market.

84
Managing for Results

• Objectives
• Authority
• Responsibility
• Training
• Motivation
• Performance
• Results
• Reward

Control
Figure 7-4
85
Strategy Implementation
Senior Management
Vision
Business Uncertainties
and Macro Strategies
Empowered Implementers
Company Culture
Micro Strategies and Tactics
Risks to be Avoided
Critical Performance Factors
Key Enterprise Business Processes
Figure 7-3
86
Information Needs
Senior Management
Emerging Opportunities and Threats
External Impact of Strategies and Tactics
Internal Impact of Strategies and Tactics
Performance Measurements
Empowered Implementers
Figure 7-5
87
Strategic Management Process
88
SWOT Analysis

• Strength A collective organizational
  competency, asset or capability that enables it
  to achieve a high level of success.
• Weakness A collective organizational
  competence, asset or capability that is
  competitively inferior and provides a
  vulnerability that can be exploited.
• Opportunity A trend or event that could lead to
  a positive change in position if addressed by a
  strategic response.
• Threat A trend or event that could lead to a
  negative change in position if not addressed by a
  strategic response.

Source The Art of Strategic Planning
for Information Technologies
89
SWOT Analysis
Vision Goals Company Values Financial Status Cash
Position ROI Position Societal Demands Competition
Core Competencies People Skills Overall Resources
Strengths Weaknesses Opportunities Threats
Suggest strategies that should be tested against
90
A Logical Approach

• Find a tactic that will work.
• Build it into a strategy.

91
Employee downsizing, right-sizing or dumb-sizing
(take your choice) should not be based solely on
cost cutting.
92
Smart Sizing

• Consistent with the vision and strategies of the
  organization.
• Help build future strengths of the company while
  streamlining or eliminating unnecessary processes
  and functions.
• A big of a price to pay for anything less than
  this.

93
Company Infrastructure

• Data Management
• User Applications
• Voice Management
• Network Management
• Plan Process
• Financial Strategy
• Organization

Figure 7-7
94
Essential to Run a Business

• Vision
• Strategy
• Tactics

The Importance of these Factors as Key
Priorities Continues When People Are Empowered
with More Authority and Responsibility
95
IT Based Strategies
MARKET PLACE
OPERATIONS
Federal Express USA Today Charles Schwab
Whirlpool Xerox
SIGNIFICANT STRUCTURAL CHANGE
BancOne Boeing Frito-Lay Wal-Mart
USAA L.L. Bean McKesson
TRADITIONAL PRODUCTS AND PROCESSES
Figure 7-6
96
Which Way Should the Arrows Go?
Business Vision and Strategies
Right Sizing
Total Quality Management
Re-engineering
97
Conclusions

• A strategy should often be kept relatively
  simple.
• Success relies on gaining understanding,
  acceptance, and support by people within the
  company.
• The strategy must accomplish its objectives by
  providing direct or indirect value to customers.
• Information Systems can only be successful if it
  supports the right business strategies.