©2005 The McGraw-Hill Companies, All rights reserved McGraw-Hill/Irwin.

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All rights reservedMcGraw-Hill/Irwin

Chapter 2Chapter 2

MAJOR BUSINESS INITIATIVES

Gaining Competitive Advantage with IT

MAJOR BUSINESS INITIATIVES

Gaining Competitive Advantage with IT

OPENING CASE STUDYOPENING CASE STUDY

• GM’s Digital Loyalty Network (DLN) Makes it More Competitive

• One of DLN’s principal innovations is order to deliver (OTD)

• OTD reduced delivery time of ordered vehicles by 50 percent

• GM’s many customer “touch points” were not being used effectively

OPENING CASE STUDYOPENING CASE STUDY

• GM’s BuyPower Web site gave it a better understanding of its customers

• U.S. call centers went from 40 to 3

• 19 global customer databases were reduced to 3 data warehouses

• GM won the Polk Automotive Loyalty Award for the fourth consecutive year

STUDENT LEARNING OUTCOMES STUDENT LEARNING OUTCOMES

1. Describe SCM systems, their competitive advantages, challenges to their use, and IT support

2. Describe CRM systems, their competitive advantages, challenges to their use, and IT support

3. Describe BI systems, their competitive advantages, challenges to their use, and IT support

STUDENT LEARNING OUTCOMESSTUDENT LEARNING OUTCOMES

4. Describe ICE systems, their competitive advantages, challenges to their use, and IT support

5. Describe how individual systems work together to give airline companies a competitive advantage

INTRODUCTIONINTRODUCTION

• Important IT applications businesses are using today– Supply chain management (SCM)

– Customer relationship management (CRM)

– Business intelligence (BI)

– Integrated collaboration environments (ICE)

SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENT

• Distribution chain – the path followed from the originator of a product/service to the end consumer

What are Supply Chain Management Systems?

• Supply chain management (SCM) - tracks inventory and information among business processes and across companies

• Supply chain management (SCM) system - an IT system that supports supply chain management activities by automating the tracking of inventory and information among business processes and across companies

What are Supply Chain Management Systems?

• Just-in-time - an approach that produces or delivers a product or service just at the time the customer wants it

• Logistics - the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers

Strategic and Competitive Opportunities with SCM

• A well-designed supply chain management system helps by optimizing:– Fulfillment

– Logistics

– Production

– Revenue and profit

– Spend

Strategic and Competitive Opportunities with SCM

• Collaborative planning, forecasting, and replenishment (CPFR) - a concept that encourages and facilitates collaborative processes between supply chain partners

Challenges to Success with Supply Chain Management

• Executives must recognize its importance

• Work closely with customers and suppliers

• Your IT systems and the IT systems of your customers and suppliers must be integrated

• Your SCM systems must continuously adapt to changing conditions

IT Support for Supply Chain Management

• Specialized SCM software and ERP software suites

• Application service provider (ASP) - supplies software applications (and often related services) over the Internet that would otherwise reside on its customers’ in-house computers.

IT Support for Supply Chain Management

CUSTOMER RELATIONSHIP MANAGEMENT

• Two success stories with customer relationship management– Wells Fargo Bank sells four additional banking

products to customers compared with an industry average of 2.2

– The American Cancer Society is better able to target large donors

What are Customer Relationship Management Systems?

• Customer relationship management (CRM) system - uses information about customers to gain insights into needs, wants, and behaviors in order to serve them better

• Sales force automation (SFA) system - automatically tracks all the steps in the sales process

What are Customer Relationship Management Systems?

Strategic and Competitive Opportunities with CRM

• More effective marketing campaigns based on customer needs and wants

• Assuring the sales force is efficiently managed

• Providing superior after-sale service and support

Strategic and Competitive Opportunities with CRM

Revenue Enhancers

• Increase sales effectiveness

• Improve customer retention

• Increase revenue per customer

• Offer new products/services

Cost Cutters

• Decrease cost of sales

• Decrease cost of service

• Cost per service interaction

• Transition to more self-service

Challenges to Success with Customer Relationship Management

• More than 50 percent of CRM installations are seen as failures

• Why many CRM installations are less than successful– The company’s goals are too broad

– The company’s strategies are too generic

– Implementations are often too software-centric

IT Support for Customer Relationship Management

• Front office systems – the primary interface to customers and sales channels

• Back office systems - used to fulfill and support customer orders

IT Support for Customer Relationship Management

• CRM software providers (e.g. Clarify, Oracle, SAP, Siebel Systems)

• SFA software providers (e.g. Clarify, Siebel, Salesforce.com, Vantive)

• Salesforce.com was the first to use an ASP model and others have followed

BUSINESS INTELLIGENCEBUSINESS INTELLIGENCE

• How FiberMark benefits from business intelligence (BI)– They used to print 1,000 page reports for each

salesperson

– Now salespeople get the information they want from FiberMark’s intranet

– FiberMark’s BI system paid for itself in 9 months

What are Business Intelligence Systems?

• Business intelligence (BI) – knowledge about your customers, your competitors, your business partners, your competitive environment, and your own internal operations – that gives you the ability to make effective, important, and often strategic business decisions.

• Business intelligence (BI) systems – the IT applications and tools that support the business intelligence function within an organization

• Competitive intelligence - business intelligence focused on the external competitive environment

• The objective of BI is to help knowledge workers understand– Capabilities available in the firm

– State of the art, trends, and future directions in the market

– Technological, demographic, economic, political, social, and regulatory trends

– Actions of competitors

• Data warehouse– a logical collection of information - gathered from many different operational databases – used to create business intelligence that supports business analysis activities and decision-making tasks

• Data mart - a subset of the data warehouse in which only a focused portion of the data warehouse information is kept

• Other technical components of business intelligence include such tools as– Data mining

– Automatic exception detection with proactive alerting and automatic recipient determination

– Automatic learning

• Data-mining tool - a software tool you use to query information in a data warehouse

Strategic and Competitive Opportunities with BI

• Strategic uses of business intelligence ranked in order of importance– Corporate performance management

– Optimizing customer relations, monitoring business activity, and traditional decision support

– Packaged stand-alone BI applications for specific operations or strategies

– Management reporting of business intelligence

• BI systems provide managers with – Actionable information and knowledge

– At the right time

– At the right location

– In the right form

Challenges to Success with Business Intelligence

• Deal with an important business issue

• Provide customized BI information

• Build discipline and precision in processes

• Knowledge workers must understand how to use BI tools effectively

• Understand that BI systems are complex and continually change

IT Support for Business IntelligenceIT Support for Business Intelligence

• There are many software companies in the BI field

• Digital dashboard - displays key information gathered from several sources on a computer screen in a format tailored to the needs and wants of an individual knowledge worker

IT Support for Business IntelligenceIT Support for Business Intelligence

INTEGRATED COLLABORATION ENVIRONMENTS

• How Siemens benefits from an integrated collaboration environment– Much of its work is done by virtual teams

– SiteScape’s Forum software lets teams share documents and ideas

– Each team member can contribute freely from anywhere and at any time

What are Integrated Collaboration Environments?

• Integrated collaboration environment (ICE) - the environment in which virtual teams do their work

• Virtual team - a team whose members are located in varied geographic locations and whose work is supported by specialized ICE software or by more basic collaboration systems

• Collaboration system - software that is designed specifically to improve the performance of teams by supporting the sharing and flow of information

• Alliance partner – a company your company does business with on a regular basis in a collaborative fashion, usually facilitated by IT systems

• Workflow - defines all of the steps or business rules, from beginning to end, required for a business process

• Workflow system - facilitates the automation and management of business processes

• Document management system - manages a document through all the stages of its processing

• Knowledge management (KM) system – an IT system that supports the capturing, organization, and dissemination of knowledge (i.e., know-how) throughout an organization

• Social network system - an IT system that links you to people you know and, from there, to people your contacts know– Build your network

– Find the people you need

– Make a trusted contact

Strategic and Competitive Opportunities with ICEs

• The payoffs can be huge

• The oil and gas exploration industry could save an estimated $7 billion

• “If only HP knew what HP knows”

Challenges to Success with Integrated Collaboration Environments

• Acceptance of knowledge management systems has been particularly difficult– People don’t submit their knowledge to the

knowledge repository– People are reluctant to share what they know with

others– People say they don’t have the time to submit

information. IT can help with techniques to capture knowledge automatically

IT Support for Integrated Collaboration Environments

• Collaboration software

• Workflow systems

• Document management systems

• Peer-to-peer collaboration software

• Knowledge management (KM) systems

• Social network systems

IT Support for Integrated Collaboration Environments

• Presence awareness - a software function which determines whether a user is immediately reachable or is in a less-available status

• Peer-to-peer collaboration software - permits users to communicate in real time and share files without going through a central server

A VIEW OF THE INTEGRATED ENTERPRISE

Airline Reservation SystemsAirline Reservation Systems

• SABRE and APOLLO were very profitable for American and United

• American and United had access to BI on their own as well as on their competitors’ flights

• Competitors had to wait to get BI and also had to pay for it

Frequent Flyer ProgramsFrequent Flyer Programs

• Frequent flyer programs are a great example of CRM

• Air travelers concentrate their travel with a single airline to get “perks”

• Finnair is using BI to increase loyalty

• Most information needed for frequent flyer programs is obtained from reservation systems

Airline Maintenance SystemsAirline Maintenance Systems

• Airlines use SCM systems to be sure maintenance parts are available when needed

• Integrating SCM and BI helps airlines predict where and when spare parts will be needed

Yield Management SystemsYield Management Systems

• Yield management system - specialized kind of decision support system designed to maximize the amount of revenue an airline generates on each flight

• Fares change over time for a specific flight based on number of seats sold

• Objective: highest average cost per seat

Yield Management SystemsYield Management Systems

Integrated Collaboration EnvironmentsIntegrated Collaboration Environments

• Many airlines are global businesses with employees located all over the world

• Airline employees often work in virtual teams

• ICEs let them avoid travel even though it’s free

• ICEs are an interesting competitive threat to airlines

CAN YOU…CAN YOU…