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Job creation incentive program seems to have backfired

financially on the state of California.

Whats Happening?!

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 AT&T for $16 billion.

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Chapter 6 Summary

Business Vision

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Chapter Objectives

Positioning vision as the starting point indirecting, posturing and running a business.

Understanding the significance of the visionprocess.

Remembering that vision triggers the entirebusiness and information technologymanagement process.

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What is a Vision?

A photograph of the future

It must be realistic and credible -- and most certainlyattractive to the organization

Concrete and easily understood ideas about the long-

range future of the business

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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 thevision process throughout the entire organizationto gain consensus and momentum.

Make things happen! Action needs to become ahigh priority.

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Sensing

Opportunity

Vision

Strategy

Tactics and

Business Plan

Agreement &Commitment

Implementation

(Action)

Feedback

The Vision to Action

Process

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Vision Uncertainty

The dynamics of the market

Rapidly changing technologies

The logic and need to address changing employeevalues and traditional methods

The shift from old regulatory practices to new

practices in many industries

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Customer Service

Frequently Drives the Vision!

For USAA, General McDermotts four stepprocess:

Automation

Lower employee attrition

Improve job trainingDecentralize decision making by empowering

employees

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USAA

Role and significance of IT?

An executive partnership

Technology experimentation and assimilation

Leveraging of information systems

Strategic architecture

Horizontal integration of applications.

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Conclusions

Successful companies are the result of good

leadership.

Talented leadership is demonstrated in the followingforms:

Determining the direction of the business.

Promoting the need for action.Fostering an environment for well directed

information systems.

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Possible Exam Questions

1. What factors influence the creation of a

vision?

2. What impact does a vision have on

information systems?

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Chapter 7 Introduction

Implementing a Vision:

Strategy, Tactics and Business Plan

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Chapter Objectives

1. Provide an understanding of how to transition a vision into

reality through strategy, tactics, and business plans.

2. Better appreciate how strategies should dictate the role and

significance of information systems.

3. Understand challenges that a company faces in

formulating appropriate strategies.

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Chapter 7 In Just One Slide!

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 ofimplementing the decided strategies.

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

The Four Components of Possible Business Success

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Elements of a Business Strategy

Competitive framework: What market are you in? How

big is it? Who are your competitors, and what are theirstrategies?

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 serviceprofitable?

Product portfolio: Interrelating a product or service with

the above four points.

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Strategic Management Process

Environmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

Company

Strategic

History

Current

Strategy

Stakeholder

Analysis

Vision &

Strategy

Chosen

Strategy

Realized

Strategy

Strength

s

Weak

nesse

s

Oppo

rtunit

ies

Threats

Company

Vision

Reprinted with permission from

The Strategic Management Blueprint

Cambridge, Ma: Blackwell, 1993.Figure 7-2

Internal

Analysis

External

Analysis

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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.

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IT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANT

STRUCTURALCHANGE

TRADITIONAL

PRODUCTSAND PROCESSES

Federal Express

USA TodayCharles Schwab

Whirlpool

Xerox

BancOne

Boeing

Frito-Lay

Wal-Mart

USAA

L.L. BeanMcKesson

Figure 7-6

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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 majorchallenges.

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Primary Business Challenges

Deciding what things are worth

doing.

Getting things done!

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If the strategy is a hammer, the tactic is

a nail. The actual end results are

accomplished by the nail. If the nailisn't hammered correctly then the battle

is lost. Sometimes the hammer also

misses the nail.

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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.

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Global 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.

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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.

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When in Doubt

Whether dealing with vision, strategies or tactic

think customer!

Remember that a major difference betweencompanies is how they treat their customers.

Also the importance of doing necessaryhomework on competitors.

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Porter Strategy Guidelines

Primary Strategies:

1. Differentiation

2. Least Cost

Supporting Strategies:

1. Innovation

2. Growth

3. Alliances

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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?

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Important Strategy Options

Focus versus breadth: Regional, national and/or selectively global

Products

Services

Markets

Business processes

Business partners

InnovationCost

Speed to market

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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.

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Great Focused Companies

Southwest Airlines

Wal-Mart Stores Dell

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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 marketsegments 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.

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Base for Execution

Strategic clarity.

High performance culture.

World-class processes.

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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.

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Business Strategies!?

How important are they, really?

Do business strategies really make a difference

between success and failure of a company?

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Need to ask the following

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?

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Strategy Consistency?

1. Internal Factors

2. Resource Factors

3. Environment Factors

4. Communication and Implementation

Considerations

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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 ofthe environment to absorb the planned impact.

Are the goals and policies consistent with societal concerns?

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Strategy Consistency?

Communication and Implementation Considerations:

Are the goals understood by the implementers?

Is there congruence between the goals and policies and thevalues of the implementers to insure commitment?

Is there sufficient management capability and availability to

assure effective implementation?

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Competitive Strategy Process

A. What is the company doing now?

Current strategy?

Assumptions about the companys relative

position, strengths and weaknesses, competitorsand industry trends.

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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 topresent and future competitors?

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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.

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IEA

Internal

External

Action

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Progressive Corporation

1988 Performance

Record Revenue

Record Earnings

Outstanding Company Culture

Highly Respected Business Leader

Well Regarded Company

Could Things Possibly Be Better?

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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.

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Progressive Corp. Business

Progressive decided that it was really

in the business of reducing humantrauma and economic costs of auto

accidents.

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Progressive 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 profitable

ways that delight customers.

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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.

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Curtail Diversification.

Reduce Operating Expenses.

Assign Business Process Ownership.

Establish a New Employee Compensation

System.

Progressives New Business Strategies

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IS Support of New Strategies

Express Quote Service.

Immediate Response System.

Vision C stomer Val e

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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.

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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 foreasy, new ways to quote, buy and manage their policies,

including claims service that respects their time and reduces

the trauma and inconvenience of loss.

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Progressive Core Values

Integrity We revere honesty. We adhere to high ethicalstandards, 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 Progressivesambitious objectives and our peoples personal and team

objectives. We evaluate performance against all these

objectives.

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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 resultsand promote on ability.

Profit The opportunity to earn a profit is how the competitive

free-enterprise system motivates investment to enhance humanhealth and happiness. Expanded profits reflects our

customers and claimants increasingly positive view of

Progressive.

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Peter Lewis

Currently Chairman of the Board

We sell speed, not insurance.

Glenn Renwick, President and Chief Executive

Officer

Raymond Voelker, Chief Information Officer

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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 theIS 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.

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Information Technology Impact

Information

Technology

Work

OrganizationPeople

Information

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Information Technology Impact

Information

Technology

Work

OrganizationPeople

Information

10 day

informationfloat

Route Salesman Regional

Competitors

I ncreased

complexi ty for

route

salesman and

plants

Semi-automated batchsystem (out-dated)

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Information Technology Impact

Information

Technology

Work

OrganizationPeople

Information

Reduced

information

f loat to 24

hoursRoute Salesman

Account Special ist

Merchandiser

Decentr ali zed Marketing

Organization

I ncreased

complexi ty for

route

salesman and

plants

Communications Networkand Hand-held Computer

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Yum! Brands

KFC

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.

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Yum! Brands

The worlds largest quick service restaurant

company with more than 33,000 units in more

than 100 countries involving 840,000employees.

36% are outside the US

Worldwide Units 2003

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Worldwide Units - 2003

0 5000 10000 15000 20000 25000 30000 35000

Yum

McDonalds

Subway

Burger King

Wendy's

Domino's Pizza

Dairy Queen

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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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International Sales

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

Asia-Pacific

Europe, South AfricaAmericas

Great China

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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 venturepartners and franchises.

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International Challenges

1. Customer food preference and taste.

2. Standard of livingproduct cost.

3. Currency fluctuations.4. Brand strength and unit consistency.

5. Distribution system.

6. Building an international team for the

company.

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Multi-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 itsunits 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

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US Quick Service Restaurant Market

Share

0% 20% 40% 60% 80%

Mexican

Chicken

Seafood

Pizza

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Restaurant Units

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

Company

Affliates

Franchisees

Licensees

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InternalAssessment ExternalAssessment

The Three Components of a New Strategy

Vision

A New Strategy Figure 7-1

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Strategy 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

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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.

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Strategy Implementation

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Senior Management

Visionand Macro

Strategies

Empowered Implementers

Micro

Strategies

and

Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical Performance

Factors

Key Enterprise

Business Processes

Figure 7-3

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Environmental Analysis

G l E i

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General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

Company

Strategic

History

Current

Strategy

Stakeholder

Analysis

Vision &Strategy

Chosen

Strategy

Realized

Strategy

Strengths

Weaknesse

s

Oppo

rtunit

ies

Threats

Company

Vision

Reprinted with permission from

The Strategic Management Blueprint

Cambridge, Ma: Blackwell, 1993.Figure 7-2

Strategic Management Process

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SWOT Analysis

Strength: A collective organizational competency, assetor capability that enables it to achieve a high level of

success.

Weakness: A collective organizational competence,

asset or capability that is competitively inferior andprovides 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 A l i

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SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Suggeststrategies that

should be

tested against

Vision

Goals

Company Values

Financial Status

Cash Position

ROI Position

Societal Demands

CompetitionCore Competencies

People Skills

Overall Resources

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A Logical Approach

Find a tactic that will work.

Build it into a strategy.

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Employee downsizing, right-sizing or

dumb-sizing (take your choice)

should not be based solely on cost

cutting.

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Company Infrastructure

Data Management

User Applications

Voice Management Network Management

Plan Process

Financial Strategy

Organization

Figure 7-7

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Essential to Run a Business

Vision

Strategy

Tactics

The Importance of these

Factors as Key PrioritiesContinues When People

Are Empowered with

More Authority

and Responsibility

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IT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANT

STRUCTURALCHANGE

TRADITIONAL

PRODUCTS

AND PROCESSES

Federal Express

USA TodayCharles Schwab

Whirlpool

Xerox

BancOne

Boeing

Frito-LayWal-Mart

USAA

L.L. Bean

McKesson

Figure 7-6

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Re-engineering Total QualityManagement

Right Sizing

Which Way Should the Arrows Go?

Business Vision

and Strategies

Conclusions

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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.