What’s Happening?!

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

What’s Happening?!What’s Happening?!

Three California congressmen are questioning the sale of IBM’s PC manufacturing to a China company based on national defense concerns.

SBC is negotiating to buy AT&T for $16 billion.SBC is negotiating to buy AT&T for $16 billion.

What’s Happening?!What’s 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.Oracle expects higher profits. Seeks closer ties with IBM.

New university – Cal State East Bay.New university – Cal State East Bay.

Chapter 6 SummaryChapter 6 Summary

Business VisionBusiness Vision

Chapter ObjectivesChapter 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.

What is a Vision?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

What Must Be AccomplishedWhat 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.

Sensing Opportunity

Vision

Strategy

Tactics and Business Plan

Agreement &Commitment

Implementation(Action)

Feedback

The Vision to ActionProcess

Vision UncertaintyVision 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

Customer ServiceCustomer Service Frequently Drives the Vision!Frequently Drives the Vision!

For USAA, General McDermott’s four step For USAA, General McDermott’s four step process:process:– AutomationAutomation– Lower employee attritionLower employee attrition– Improve job trainingImprove job training– Decentralize decision making by empowering Decentralize decision making by empowering

employeesemployees

USAAUSAA

Role and significance of IT?Role and significance of IT?– An executive partnershipAn executive partnership– Technology experimentation and assimilationTechnology experimentation and assimilation– Leveraging of information systemsLeveraging of information systems– Strategic architectureStrategic architecture– Horizontal integration of applications.Horizontal integration of applications.

WhirlpoolWhirlpool

Decided that it would become the global leader in Decided that it would become the global leader in the large appliance industry.the large appliance industry.

Initially identified product technology and Initially identified product technology and procurement as key factors to realize this goal.procurement as key factors to realize this goal.

Added information systems as an essential third Added information systems as an essential third factor to achieve this goal.factor to achieve this goal.

ConclusionsConclusionsSuccessful companies are the result of good Successful companies are the result of good leadership.leadership.

Talented leadership is demonstrated in the following Talented leadership is demonstrated in the following forms:forms:

– Determining the direction of the business.Determining the direction of the business.– Promoting the need for action.Promoting the need for action.– Fostering an environment for well directed Fostering an environment for well directed

information systems.information systems.

Possible Exam QuestionsPossible Exam Questions

1.1. What factors influence the creation of a What factors influence the creation of a vision?vision?

2.2. What impact does a vision have on What impact does a vision have on information systems?information systems?

Chapter 7 IntroductionChapter 7 Introduction

Implementing a Vision: Implementing a Vision:

Strategy, Tactics and Business PlanStrategy, Tactics and Business Plan

Chapter ObjectivesChapter Objectives

1.1. Provide an understanding of how to transition a vision into Provide an understanding of how to transition a vision into reality through strategy, tactics, and business plans.reality through strategy, tactics, and business plans.

2.2. Better appreciate how strategies should dictate the role Better appreciate how strategies should dictate the role and significance of information systems.and significance of information systems.

3.3. Understand challenges that a company faces in Understand challenges that a company faces in formulating appropriate strategies.formulating appropriate strategies.

Chapter 7 In Just One Slide!Chapter 7 In Just One Slide!

Vision:Vision: What the company wants to look like in the What the company wants to look like in the future.future.

Strategy:Strategy: Ideas on how to accomplish the vision, by doing Ideas on how to accomplish the vision, by doing an external and internal analysis of the company.an external and internal analysis of the company.

Tactics:Tactics: The specific, time-oriented method of The specific, time-oriented method of implementing the decided strategies.implementing the decided strategies.

Business Plan:Business Plan: The plan for allocating company resources. The plan for allocating company resources. (aka: Operating Plan or Budget) (aka: Operating Plan or Budget)

The Four Components of Possible Business SuccessThe Four Components of Possible Business Success

Elements of a Business StrategyElements of a Business Strategy Competitive framework:Competitive framework: What market are you in? How What market are you in? How

big is it? Who are your competitors, and what are their big is it? Who are your competitors, and what are their strategies?strategies?

Market target:Market target: What type of customer are you selling to? What type of customer are you selling to? What are their needs, attitudes, and priorities?What are their needs, attitudes, and priorities?

Basis for perceived competitive superiority:Basis for perceived competitive superiority: How do your How do your customers define your product or service as superior? customers define your product or service as superior?

Key profit drivers:Key profit drivers: What makes your product or service What makes your product or service profitable?profitable?

Product portfolio:Product portfolio: Interrelating a product or service with Interrelating a product or service with the above four points.the above four points.

Business Strategy ChallengesBusiness Strategy Challenges Is the strategy consistent with our vision?Is the strategy consistent with our vision? Is the scope of strategy right?Is the scope of strategy right? Is there are logical balance between short term and Is there are logical balance between short term and

long term objectives?long term objectives? How does this compare to the industry leader?How does this compare to the industry leader? How aggressive should the strategy be How aggressive should the strategy be

implemented?implemented? Do people skills exist and are they availability?Do people skills exist and are they availability? Are capital and operating funds available?Are capital and operating funds available?

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysisVision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Internal Analysis

External Analysis

Example: Progressive CorporationExample: Progressive Corporation

Vision: Vision: Reduce the economic cost and human trauma of automobile Reduce the economic cost and human trauma of automobile accidents and provide services that delight consumers.accidents and provide services that delight consumers.

Plan of Action: Plan of Action: Make major changes to the definition of their business and Make major changes to the definition of their business and financial objectives.financial objectives.Align core business strategies based on these changes.Align core business strategies based on these changes.

Senior ManagementStrategy ImplementationStrategy Implementation

Visionand MacroStrategies

Empowered Implementers

MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

Business PlanBusiness Plan

The most straight-forward part of the entire process.The most straight-forward part of the entire process.

Deals with allocation of funds, people and other Deals with allocation of funds, people and other resources.resources.

IT Based StrategiesIT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANTSTRUCTURALCHANGE

TRADITIONALPRODUCTSAND PROCESSES

Federal ExpressUSA TodayCharles Schwab

WhirlpoolXerox

BancOne Boeing Frito-Lay Wal-Mart

USAA L.L. Bean McKesson

Figure 7-6

Plan for Action!Plan for Action!As has been emphasized: the point of all of this is to As has been emphasized: the point of all of this is to

make things happen. Key to such an effort:make things happen. Key to such an effort:

Simple StrategySimple Strategy

Aggressive ImplementationAggressive Implementation

ConclusionsConclusions Business strategies can frequently work without Business strategies can frequently work without

information systems support.information systems support. IS support can be a key enabler of a successful business IS support can be a key enabler of a successful business

strategy.strategy. IS implementations won’t contribute to the success of the IS implementations won’t contribute to the success of the

company unless the right strategies are in place.company unless the right strategies are in place. In the current business environment, identifying and In the current business environment, identifying and

implementing the best possible strategies often faces major implementing the best possible strategies often faces major challenges. challenges.

Chapter 7 Chapter 7

Implementing a Vision:Strategy, Tactics and

Business Plan

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

Primary Business ChallengesPrimary Business Challenges

• Deciding what things are worth doing.

• Getting things done!

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.

Be CarefulBe 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.

Global ManagementGlobal Management

Managers must be prepared to engage in heightened international competition and have the ability to:

1. Manage organizations in different cultural settings.2. Establish a value system within the organization.3. Market products in different countries.4. Adapt to changing markets.5. Develop appropriate strategies dealing with finance,

accounting, manufacturing, marketing and management of the organization.

Defining the Process ElementsDefining 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.

When in DoubtWhen 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.

Porter Strategy GuidelinesPorter Strategy Guidelines

Primary Strategies:

1. Differentiation

2. Least Cost

Supporting Strategies:

1. Innovation

2. Growth

3. Alliances

Business Strategy Model Business Strategy Model GuidelinesGuidelines

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?

Important Strategy OptionsImportant Strategy OptionsFocus versus breadth: Regional, national and/or selectively global Products Services Markets Business processes Business partnersInnovationCostSpeed to market

Focus ChallengesFocus Challenges

The grass is always greener.The grass is always greener. Failure to see important changes in markets or Failure to see important changes in markets or

product areas.product areas. The constant need for revenue and profit growth.The constant need for revenue and profit growth. The difficulty in self-renewal of the base business.The difficulty in self-renewal of the base business.

Great Focused CompaniesGreat Focused Companies

Southwest AirlinesSouthwest Airlines

Wal-Mart StoresWal-Mart Stores

DellDell

More Strategy ChallengesMore 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.

Base for ExecutionBase for Execution

Strategic clarity.Strategic clarity.

High performance culture.High performance culture.

World-class processes.World-class processes.

Strategy ClarityStrategy 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.

Business Strategies!?Business Strategies!?

How important are they, really?

Do business strategies really make a difference between success and failure of a company?

Need to ask the following Need to ask the following questions:questions:

1. What is driving competition in our industry or one that we might enter?

2. What actions are competitors likely to take and what is the best way to respond?

3. How will our industry evolve over time?

4. How can we be best positioned to compete in the long run?

Strategy Consistency?Strategy Consistency?

1. Internal Factors

2. Resource Factors

3. Environment Factors

4. Communication and Implementation Considerations

Strategy Consistency?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 company’s ability to change?


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?


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?

Competitive Strategy ProcessCompetitive Strategy ProcessA. What is the company doing now?

Current strategy?

Assumptions about the company’s relative position, strengths and weaknesses, competitors and industry trends.

Competitive Strategy ProcessCompetitive 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?

Competitive Strategy ProcessCompetitive Strategy Process

C. What should the company do?

Test the assumptions and strategy.

Consider alternative strategies.

Chose the strategy that best relates to the company’s situation relative to external opportunities and threats.

IEAIEA

Internal

External

Action

Progressive CorporationProgressive Corporation

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

Progressive CorporationProgressive 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 Progressive’s Niche Market for the First Time.

Progressive Corp. BusinessProgressive Corp. Business

Progressive decided that it was really in the business of reducing human trauma and economic costs of auto accidents.

Progressive Corp. VisionProgressive Corp. Vision

We seek to be an excellent, innovative,growing and enduring business by reducingthe human trauma and economic costs of auto accidents in cost-effective and profitableways that delight customers.

Progressive’s New Business StrategiesProgressive’s 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.

• Curtail Diversification.

• Reduce Operating Expenses.

• Assign Business Process Ownership.

• Establish a New Employee Compensation System.

Progressive’s New Business StrategiesProgressive’s New Business Strategies

IS Support of New StrategiesIS Support of New Strategies

• Express Quote Service.

• Immediate Response System.

Vision, Customer Value Vision, Customer Value Proposition, Core Values and Proposition, Core Values and

ObjectivesObjectivesProgressive 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.

ProgressiveProgressiveCustomer Value Proposition:

Our customer value proposition provides a litmus test for customer interaction, relationships and innovation.

Fast, Fair, Better

That’s 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.

ProgressiveProgressiveCore Values:

Progressive’s 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.

Progressive Core ValuesProgressive Core ValuesIntegrity 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 Progressive’s ambitious objectives and our people’s personal and team objectives. We evaluate performance against all these objectives.

Progressive Core ValuesProgressive 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.

Peter LewisPeter Lewis

Currently Chairman of the Board

“We sell speed, not insurance.”

Glenn Renwick, President and Chief Executive Officer

Raymond Voelker, Chief Information Officer

IS Exec Identity CrisisIS 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 don’t know how you can help. I’m not even sure what your role is in all of this” replied the VP of Marketing.

Information Technology ImpactInformation Technology Impact

Information Technology

Work

OrganizationPeople

Information



Work

OrganizationPeople

Information10 day

information float

Route Salesman Regional Competitors

Increased complexity for route salesman and plants

Semi-automated batch system (out-dated)



Work

OrganizationPeople

InformationReduced

information float to 24

hoursRoute SalesmanAccount SpecialistMerchandiser

Decentralized Marketing Organization

Increased complexity for route salesman and plants

Communications Network and Hand-held Computer

Yum! BrandsYum! BrandsKFC

Pizza Hut

Taco Bell

Long John Silver

All American Food (A&W)

Created as Tricon Global Restaurants on October 6, 1997 as a spin off from Pepsi.

Yum! BrandsYum! Brands

The world’s 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

Worldwide Units - 2003

0 5000 10000 15000 20000 25000 30000 35000

Yum

McDonalds

Subway

Burger King

Wendy's

Domino's Pizza

Dairy Queen

Long Term GoalsLong Term Goals

1. To be the premier global restaurant company.

2. Transform the Quick Service Restaurant industry with multi-branding.

3. Become the best restaurant company investment.

Business StrategiesBusiness Strategies

1. Drive International Growth

2. Multi-brand Great Brands

3. Improve Operations of Brand Portfolio with Customer Mania

International GrowthInternational 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.

International Sales

0% 10% 20% 30% 40% 50%

Asia-Pacific

Europe, South Africa

Americas

Great China

International Growth FocusInternational 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.

International ChallengesInternational Challenges

1. Customer food preference and taste.

2. Standard of living—product cost.

3. Currency fluctuations.

4. Brand strength and unit consistency.

5. Distribution system.

6. Building an international team for the company.

Multi-brandingMulti-branding

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.

Multi-branding gives customers more choices and variety.

McDonalds has been the envy of this industry since its units average $1.6 million a year (almost twice that of Yum!)

Pasta Bravo will be tested as a multi-brand with Pizza Hut.

40% of multi-branding is being done by franchisees.

US Quick Service Restaurant Market Share

0% 20% 40% 60% 80%

Mexican

Chicken

Seafood

Pizza

Restaurant Units

0 2,000 4,000 6,000 8,000

Company

Affliates

Franchisees

Licensees

InternalAssessment

ExternalAssessment

The Three Components of a New Strategy

Vision

A New Strategy Figure 7-1

Strategy ConsiderationsStrategy Considerations• Competitive Environment

• Market Target

• Basis for Perceived Competitive Advantage

• Key Profit Drivers

• Product and/or Service Portfolio

Hello, Porter Competitive Model!

Strategy-to-Tactics Strategy-to-Tactics ImplementationImplementation

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.

Managing for ResultsManaging for Results

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

Control

Figure 7-4

Senior ManagementStrategy ImplementationStrategy Implementation

Visionand MacroStrategies


MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

Information NeedsInformation NeedsSenior Management


Emerging Opportunities and Threats

Internal Impact of Strategies and Tactics

External Impact of Strategies and Tactics

Performance Measurements

Figure 7-5

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysisVision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Strategic Management ProcessStrategic Management Process

SWOT AnalysisSWOT 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

SWOT AnalysisSWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Suggest strategies that should be tested against

VisionGoalsCompany ValuesFinancial StatusCash PositionROI PositionSocietal DemandsCompetitionCore CompetenciesPeople SkillsOverall Resources

A Logical ApproachA Logical Approach

• Find a tactic that will work.

• Build it into a strategy.

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

Smart SizingSmart 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.

Company InfrastructureCompany Infrastructure

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

Figure 7-7

Essential to Run a Business 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

IT Based StrategiesIT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANTSTRUCTURALCHANGE

TRADITIONALPRODUCTSAND PROCESSES

Federal ExpressUSA TodayCharles Schwab

WhirlpoolXerox

BancOne Boeing Frito-Lay Wal-Mart

USAA L.L. Bean McKesson

Figure 7-6

Re-engineering Total QualityManagement

Right Sizing

Which Way Should the Arrows Go?Which Way Should the Arrows Go?

Business Visionand Strategies

ConclusionsConclusions 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.

Documents

What’s Happening?!