Strategy Implementation
• E-C Value Creation
• Process Redesign
• Change Management
• IT Project Management
E-C Value Creation: Five Levers
• Time (cycle time reduction)
• Distance (overcome distance)
• Relationships (trust and loyalty)
• Interactions (chat, bboard, community)
• Product (enhancements, new products)
Value Creation: Time
Reduce cycle time
Quick order entry
Example: Amazon’s 1-click shopping
Extend business hrs.
24X7 Service
Example: 25% Grainger’s Web sales
Value Creation: Distance
Virtual presence Virtual network
Example: autobytel.com
Location independence
Real-time chat
Example: AOL’s Instant Messenger
Value Creation: Relationships
New intermediaries
Alter Role of Intermediaries
Example: FreeMarkets.com
Lock-in User Create switching costs
Example: OfficeDepot.com
Value Creation: Interactions
Get feedback Extensive User Feedback
Example: McGraw-Hill (betabooks)
Give control User Controls Information Access
Example: Otis e*Direct (Plan Your ProjectSM)
Value Creation: Product
Transactions to solutions
Help buy/sell used equipment
Example: Milacron
Decision support
Online Decision Support Tools
Example: Turner mania for media managers
Three types of Value Creation
• Efficiency or cost reduction
• Effectiveness or better decisions
• Strategic or competitive advantage
E-C Value Creation
Efficiency Effectiveness Strategic
Time
Distance
Relationships
Interaction
Product
Strategy Implementation
• E-C Value Creation
• Process Redesign
• Change Management
• IT Project Management
Process: A set of activities to produce output for customer/market
- Set of inputs + Ordered activities
- Cost, time, quality & customer satisfaction
- Dynamic view of how value is created
Focus: How, not just what
Organizational Structure: Cross functional teams
Process Definition
Examples of Cross-Functional Processes
Competitor Analysis &
Market Research
R & D Marketing ManufacturingNew
ProductNew Product Development
Business Proposal Commitment Configuration Credit Delivery Billing Collection Processes
Business Sales Manufacturing Finance Logistics Functions
New Product Development
Order Management
Automation vs. Reengineering
• Efficiency
• Functional
• Same old rules
• Control
• Low risk, low gain
•
•
•
•
•
Principles of Process Design
• Focus on outcomes, not tasks
• Do it yourself (Production buys from certified suppliers)
• Integrate information processing with real work (Ford)
• Treat distributed work as centralized (Global buying)
• Link parallel activities while in process, not at the end
• Match decision point with work location (empower)
• Capture information once, and at the source
Ford Purchasing
(1) Purchase Order
Vendor
Vendor
(2) Purchase Order Copy
(3) Receiving Document
Ford Receiving
Accounts Payable (500)
(5) Payment
Goods
(4) Invoice
Ford Purchasing EDI
GoodsFord Receiving
Accounts Payable (125)
EFT
EFT
Ford & Vendor Banks
Procurement Database
Ford’s Procurement ProcessBefore
After
Mortgage Loan Processing at BANC ONE
Closing
Closing
Laptop
Loan Input
Desk-to-Desk Approach: 17 days
Team Approach: 2 days
Role of Information
• Process performance monitoring (quality control)
• Process integration (information as process glue)
• Process customization (mass customization)
• Information rich processes (e.g., financial sector)
• Management processes (need external/informal data)
Organizational Enablers
Benefits: Wider skill set, Quality of lifeStructure:Team
Criteria: Leadership, Composition, Clarity of goals
Empowerment
Routines/Culture Participative decision making
Lateral communication
Incentives, Gain sharing
Compensation Career paths: More horizontal, less vertical
Work role rotation to create a shared mind set
Why is process re-design difficult?
Any major organizational change requires
•
•
•
Strategy Implementation
• E-C Value Creation
• Process Redesign
• Change Management
• IT Project Management
What is the new economy?
• A loosely defined concept to explain the stock market boom in 90s and Internet explosion!
• Earlier uses have described service economy, globalization, and corporate restructuring.
• The IT productivity paradox was finally set aside in late 90s.
• The longest economic expansion ending in Mar ‘01 was often attributed to the new economy.
Old vs. New Economy?
Industry Context• Low Complexity• Static
Strategy Formulation• Strategy to fit Industry
Strategic Lever• Plan for competition
Basis for Advantage• Entry & Exit Barriers
Industry Context• High Complexity• Dynamic
Strategy Formulation• Innovations• Network effectsStrategic Lever• Speed
Basis for Advantage• Organizational flexibility
Change Management
– Change is the only certainty in the business world!
– Assess the abilities & disabilities of the organization as a whole
– The ability of an organization to conceptualize and manage change enables it to compete from the inside out
– How can organizations change faster then their environment?
– How can mature incumbents effect change?
Organization Life Cycleand Change Challenges
Organization Life cycle Change challenges
Niche identification (Amazon)
Survival shakeout(Dot-coms)
Renewal(Whirlpool: Functional
to Business units)
Reenergizing
Entrepreneurial
Growth
Maturity
Decline
Restructuring
Bureaucracy bashing
Employee involvement
Continuous improvement
Cultural change
Right work
Improved work
Open/flexible
Closed/inflexible
Open/flexible
Renewal of Organizations
§ Many cannot renew within, and fall prey to consolidations, acquisitions and mergers.
How do organizations overcome the renewal challenge?
1. By altering their strategy, structure and systems.
2. By changing the mindset (accepted behavior / attitudes)
3. By focusing on customer perspective (external / internal
customer satisfaction in performance appraisal system)
4. By reducing cycle time (boundaries inside / outside)
5. By empowering employees who act as leaders
A Process for Re-energizing Mature OrganizationsC
hang
e/Im
pact
5. SUSTAINED COMPETITIVE ADVANTAGE (Magnitude of Long-Term Impact)
• Mindset • Leadership • Work
Employees no longer feel part of mature organization! 4. CONTINUOUSIMPROVEMENT
•Simplicity •Speed • ServiceFocus on “right” work!Su
pplie
s
Cus
tom
ers
3. EMPLOYEE EMPOWERMENT• Involvement • Job Design •
CommunicationProfit sharing, access to management!2. BUREAUCRACY “BASHING”
• Reports •Meetings • Approvals • Measures
Replace low-value work!1. RESTRUCTURING
• Downsizing • Delayering Be fair yet bold!
Time
Types of Organizational Change
Anticipatory
Reactive
Incremental Strategic
Tuning
Adaptation
Reorientation
Disruptive
Tuning
Adaptation
Reorientation
Disruptive
Inte
nsi
ty o
f Ch
ang
e
High
Low
What is Disruptive Change?
Sustaining Innovations
– Improve product in ways customers value
Disruptive Innovations
– A new market for a new product which is worse, not better, than competing products
– Incumbents possess capabilities to foster Sustaining Innovations, and disabilities to embrace Disruptive Innovations
1. Creating new capabilities internally: Pull the relevant people out of the existing organization, draw a new boundary around the new group, and create a new process. Examples?
2. Creating new capabilities thru a spinout: If you need a new cost structure or if the opportunity is small, a spinout may work. No need to compete with mainstream organization for resources. Often used by incumbent companies to deal with the Internet.
3. Creating new capabilities thru acquisitions: Easier if capabilities stem from resources only.
How Can Incumbents Manage Disruptive Change?
Common Change Implementation Problems
• Longer than anticipated
• Major new problem
• Coordination not effective
• Competing programs and crises
• Employee capabilities insufficient
• Training and instruction inadequate
• Uncontrollable external factors
Strategy Implementation
• E-C Value Creation
• Process Redesign
• Change Management
• IT Project Management
Investigation: Feasibility (Economic, Technical, Operational)
Analysis: Requirements Determination, Logical Design
Detailed Design: Technical Design, Coding & Testing, User Training
Implementation: File conversion, System Installation
Classical Systems Development Life Cycle
Identifyproblem
DevelopPrototype
InitialRequirements
WorkingPrototype
Convert to Production
System
Implement &Use Prototype
If PrototypeInefficient Problems
Next Version
NewRequirements
Revise & Enhance
Schematic of Prototyping
Requirements Determination
• Information Content, Accuracy, Coverage
• System Reliability, Response Time, Transaction Volume, Data Volume
• Changes in Input, Output, Processing, Database, Communication
Problems of Requirements Determination
• Human Limitations
• Variety & Complexity of Requirements
• Communication Problem
IT Project Evaluation
• Economic Feasibility
• Operational Feasibility
• Technical Feasibility
• Risk Assessment
Economic Feasibility
* Development & Operation Costs
* Tangible and Intangible Benefits
* Cost Benefit Analysis
* Payback Period
* Return on Investment
Operational Feasibility
• Management Support
• User Resistance / Involvement / Training
• New People Required
• Ease of Use
Technical Feasibility• Technology Required
• Technology Acquisition
• Schedule Feasibility
• Resource Requirement
• Skills Required
• Outside Help
Project Risk Assessment
• Project Size
• Project Structure
• Development Group
• User Group
Project Risk Assessment
Familiarity with Technology / Application
Project Size Low Structure
High Structure
High Large High Risk Medium Risk
High Small Medium Risk
Low Risk
Low Large Very High Risk
High Risk
Low Small High Risk Medium Risk