Competitive Advantage
Content
MIS 480 GROUP PRESENTATION
Using Information Technology
for Competitive Advantage
Jolanta Zadlo & Gary Gray
IT as a Competitive Weapon
IT and Competitive Advantage
Sustainability of Competitive Advantage
Case Studies
Sabre
GE
Conclusion
Definition:
Information Technology
Information Technology (IT) is the
amalgamation of hardware, software, data,
people and procedures that enables or inhibits
business objectives depending on
management’s involvement in IT.
Source: Why General Managers Need to Understand
Information Technology, lecture notes, Lacity, 2002
How the information revolution
affects competition
Changes industry structure thereby altering
the rules of competition
Creates competitive advantage by giving
new ways to outperform rivals
Spawns whole new businesses
Source: How information gives you competitive advantage,
Porter and Millar, 1985
How IT creates a competitive
advantage
Differentiate a product or service
Improve business processes (lower costs)
Change a business structure
Create new business
Source: IS 480 lecture notes, Lacity, 2002
Competitive advantage comes
from critical differentiators
Critical
Critical
Commodities
Critical
Differentiators
Useful
Useful
Commodities
Eliminate/Migrate
Commodity
Source: IS 480 lecture notes, Lacity, 2002
Differentiator
IT as a Competitive Weapon Sustainability
Very few companies sustain their competitive edge over
the long term
Sustainability occurs when it is difficult or impossible
for the competition to respond
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
IT Resources-Easily Duplicated
• Capital for investment
• Proprietary technology
• Technical Skills
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
IT Resources-NOT Easily Duplicated
Managerial IT Skills
• Understanding business needs
• Collaborating with colleagues
• Managing market & technical risk of innovation
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
Sustainable Advantage
1. How long before a competitor responds?
Supply
Project2.
Life-Which competitors
Competitorcan/will respond?
System
cycle Analysis
Analysis
Analysis
3. Will the response be effective?
Lead Time
Competitive
Asymmetry
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
Pre-emption
Potential
IT as a Competitive Weapon Sustainability
3 Pillars Supporting Sustainable Advantage
• Lead Time
• Information leaks
• Followers take short cuts
• Followers implement better solutions
• Competitor Analysis
(Difficulty of competitor to respond or copy application)
• Supply system analysis
• Market capture
• Switching costs
Case studies selected:
AmericanAirlines
General Electric Company
Sabre Holdings Corporation
Current Company
Background
S&P Fortune 500 Company
$2.1B in revenues in 2001
TSG – “The Sabre Group”
Traded on the NYSE – 1996
Current Price – about $21
Headquarters – Dallas/Fort Worth, TX
Source: www.sabre.com
Sabre Holdings Corporation
Current Company Background
7,000 employees in 45 countries
Sabre connects more than 60,000
travel agency locations worldwide,
providing content for 400 airlines
(complete flight data, seat maps, etc) ,
55,000 hotel properties (room availability, type, price), 52 car
rental companies, nine cruise lines, 33 railroads and 229 tour
operators.
Source: www.sabre.com
Sabre Holdings Corporation
Financial Data
Revenues in Billions
Earnings in Millions
$2.5
$350
$300
$2.0
$250
$1.5
$200
$150
$1.0
$100
$0.5
$0.0
$50
1997
1998
1999
2000
2001
$0
1997
1998
1999
2000
2001
Revenues from operations declined 19% in 2001 due to
9/11 events and lower US and worldwide travel volumes, but
were more than compensated for by revenue from
outsourcing to EDS, profits did not fare as well.
Source: Sabre’s 2001 Summary Annual Report
Sabre Holdings Corporation
Financial Picture
2001 Revenues by Business
GetThere
2%
Airline
Solutions
9%
Travelocity
11%
Travel
Marketing &
Distribution
78%
Source: Sabre’s 2001 Summary Annual Report
Sabre Holdings Corporation
Information Technology
Both Carol Kelly, Senior VP and CIO,
and Craig Murphy, Senior VP and CTO
report to the CEO
Sabre outsourced its mainframe and data center to
EDS. However, Sabre has retained a sizeable
investment in IT.
Source: Interview of Jim Menge, VP Technology Sales, Sabre
What is Sabre
SemiAutomatic
Business
Research
Environment
Source: Computerworld, Technology Takes Flight, Sep 2002
IT to Improve Business Processes:
American Airlines developed Sabre to
automate the process of reserving airline seats.
Source: Computerworld, Technology Takes Flight, 9/02
American Airlines:
improves a business process
1959 – American Airlines (AA) and
IBM sign a contract for the joint
development of a real-time reservation
system that combines in a centralized
electronic unit, 2 basic reservation
records – the passenger name record
(PNR) and the seat inventory. AA
spends $150M on the development of
the system. Sabre was based upon
technology created by MIT for DOD.
Source: Data Management, Sep 1981 & Computerworld Mar 1999
American Airlines:
improves a business process
AA’s reservation process used a system based on computer
cards and teletypes and required the efforts of 12 people, at
least 15 steps and up to 3 hours to record
a roundtrip reservation.
The error rate was 8%.
Sabre reduced costs and the error rate.
Source: www.sabre.com
American Airlines:
improves a business process
1960 – American Airlines (AA) installed the first Sabre
system, a computer reservation system (CRS). Represented
state-of-the-art technology and processed 84,000 calls per day.
Research, development and installation cost $40 million with
an investment of 400 man-years of effort.
Source: www.sabre.com
American Airlines:
improves a business process
1964 – AA completes cutover to Sabre with a
coast to coast network in the US.
Sabre is the largest, private real-time data
processing system.
Source: www.sabre.com
Competitive Edge
Competitive advantage from process change
Source: www.sabre.com
Competitive Edge
AA saved 30% of its investment in staff alone
Sabre delivers an error rate of less than 1%
Sabre creates a competitive edge that lasts for
5 to 7 years
Source: www.sabre.com
Competitive Edge
Other CRS providers today:
Apollo – rolled out by United in 1976
Worldspan – Delta, Northwest and TWA
Amadeus – largest foreign owned CRS
Sabre continues as the industry leader today
Worldspan is the only airline owned CRS
Source: www.sabre.com and BTMC records
Sabre System History – 1970s
1972 – Sabre system upgraded to IBM 360s
1976 – Sabre system first installation
in a travel agency – by year end 130 locations
and captured about 86% of the market
United Airlines introduces Apollo
1978 – Sabre stores 1M fares
Source: www.sabre.com
Sabre System History – 1980s
1981 – Sabre has a slight market share advantage
over Apollo
The competitive edge has all but disappeared
1981 – AA introduces the first airline frequent flyer
program
1984 – Sabre introduces low-fare search engine – a
service unmatched in the industry
Sources: Business Week, Aug 1982, Direct Marketing, Jul 1983
and www.sabre.com
Sabre System History – 1980s
1985 – AA allows travel agencies to use personal
computers to tap into the Sabre system via computer
online services to access airline, hotel and car rental
reservations
1986 – AA/Sabre installs the industry’s first
automated yield management system
1988 – Sabre system stores 36 million fares
Source: www.sabre.com
Sabre System History – 1980s
1987 – With airlines in their 8th year of deregulation,
information and transaction processing has become more
profitable than selling seats. AA’s Sabre System produced
pretax margins of 30% vs. 5.2% percent from tickets.
Source: Business Week, 1987
Sabre System History – 1980s
1988 – Sabre system stores 36 million fares
1989 – A computer foul-up shut down AA’s Sabre ticketing
system for 12 hours, apparently the result of a glitch written
into the system. The system failure left 14,000 travel agencies
and a large part of AA without flight information.
Lesson ?
Sources: New York Times and Business Week, 1989
Sabre System History – 1990s
1995 – Sabre begins to prepare for Y2K –
software is distributed to 40,000 travel agents
in 1998. Y2K costs estimated at $78M.
1996 – Sabre names its first CIO
Source: www.sabre.com & Computerworld, May 1996 and
Computerworld, Mar 1998
The Web Threat
Airlines begin to focus on the Web as a
means to further reduce their
distribution costs
Source: www.sabre.com
A New Way to Cut Costs
1995 – AA and all major US carriers reduce
travel agency commissions on domestic flights.
Commission is capped at $50.
Additional reductions are made in 1997 (% decreased from 10%
to 8%), 1998 (international commissions capped at $100), 1999
(% decreased to 5%), 2001 (domestic caps reduced to $20) and
2002 (commissions eliminated)
Source: www.sabre.com and BTMC records
Sabre System History – 1990s
1996 – Sabre becomes a separate
subsidiary of AMR and AMR releases 18%
to be publicly traded (total spin-off in
2000)
Source: www.sabre.com
Sabre System History – 1990s
1996 –– Travelocity.com, currently the industry’s
leading online consumer travel website is launched.
Source: www.sabre.com
Sabre System History – 1990s
By 1998 Sabre had evolved into a global
distribution system (GDS) for travel reservations
connecting more than 30,000 travel agents and 3
million online customers with 400 airlines, 50 car
rental companies, 35,000 hotels and dozens of
railways, tour companies and cruise lines.
About 1% of all airline tickets are purchased on the
web in early 1998.
Source: Computerworld, Sep 2002 & Forbes, Apr 1998
Sabre System History – 1990s
1999 – Sabre®Virtually There™, a web based
system that provides travelers itinerary and destination
info via the internet
Source: www.sabre.com
The Web Threat
1995 – Sabre considers development of the
first corporate online booking tool – BTS. The
project is incubated for 2 to 3 years.
1997 – Development of the BTS begins.
1998 – BTMC agrees to beta test Sabre’s BTS
for Boeing travelers.
Source: interview and BTMC records
Online Booking
1998 – Sabre is unable to expand BTS to be a multiCRS system.
1999 – BTMC terminates agreement with Sabre and
signs with small startup firm – Internet Travel
Network for a multi-CRS system.
BTS is available today in a Spanish version which is
still in use today.
Source: BTMC interview and BTMC records
Online Booking
2000 – Sabre acquires GetThere.com, formerly
Internet Travel Network for $757M. GetThere’s
online product is currently the leading provider of
online booking solutions. Purchase completed to gain
customer base and keep competitors from purchasing.
Sources: www.sabre.com, interview & Computerworld, Aug 2000
The Web Threat
Sabre’s recent response to the web which
threatens its core business model
- Sabre signs deals with Hotwire.com and
Priceline.com to provide key technology – both
companies are also competitors of Sabre’s
Travelocity.com
Source: Computerworld, Aug 2000
The Initial Outsourcing
In August 1996, Sabre signed a 7 year outsourcing
deal which transferred responsibility for its travel
reservations network. A partnership of Paris-based
airline network SITA and Atlanta-based Equant
essentially purchased the network for $450M for 7
years. Sabre transferred 80% of its network engineers
to SITA.
Source: Computerworld, December 1997
Outsourcing a mature product
In July 2001, Sabre signed a 10 year, $2.2B
outsourcing contract with EDS. EDS purchased
Sabre’s IT infrastructure assets and data centers and
Sabre’s airline technology outsourcing business. Over
4,000 Sabre employees transferred to EDS. This
transaction represented $600M in revenue to Sabre.
Source: Computerworld July 2001 and interview
The Future
Sabre continues to develop and release new
products on an ever increasing pace.
Continued change required to maintain
customer satisfaction. Revenues from the
traditional CRS/GDS model must be replaced
by new lines of business.
Success with IT:
Strategies
1980’s: Killer Application
• AA/UA-Reservation Systems
• American Hospital Supply-Online ordering system
• Frito-Lay-Handheld devices for sales
Early 1990’s: Re-engineering
• Redesigning business processes around technology
Mid 1990’s: Information Management
• Knowledge Management
• ERP
• CRM
http://www.cio.com/archive/050101/davenport_content.html
Success with IT:
Strategies
Late 1990’s: e-Commerce
Today
•
•
•
•
•
e-Commerce is not enough
IT investment in the business core (touches customer)
Business commitment
Commitment to change (continually re-invent and never rest)
Using multiple technologies and management approaches (not
just one)
• Company must excel in front office(e-commerce, CRM) , back
office (ERP), and data warehousing, mining, and KM
• Information focus (to make smart decisions)
http://www.cio.com/archive/050101/davenport_content.html
It’s All About “E”
Overview
Strategy
e@GE
Summary
Case Study:
General Electric
• Company Overview
• Digitization Strategy
• Examples
• Buy Side
• Plastics
• Appliances
• Power Systems
• Aircraft Engines
• Sell Side
• Make Side
• Summary
e-business Is Business Just Simpler, Faster, and Better
General Electric:
Company Overview
• Formed in 1892
• Only company part of the Dow Jones's Industrial Index since the
Index’s debut
• 67,588 patents, 2 Nobel Prizes and numerous other honors
• Operates in more than 100 countries and employs 313,000 people
worldwide
• GE is considered to be one of the largest and most diversified
industrial corporations in the world
www.ge.com
General Electric:
Company Overview
• Short-cycle businesses contributed approximately 20% of GE's net earnings in
2001
• Consumer Products (Lighting & Appliances)
• Plastics
• Industrial Systems
• NBC
• Specialty Materials
• Long-cycle businesses contributed approximately 40% of GE's net earnings
in 2001
• Medical Systems
• Power Systems
• Transportation Systems
• Aircraft Engines
• Financial services contributed approximately 40% of GE's net earnings in 2001
GE – Digitization Strategy
• Before 1999 - IT at GE was non existent
• 1999 - Jack Welch orders each business to “Destroy your
business/ Grow your business”
• Use information technology to “create a leaner, faster,
more customer focused company, accelerate high
margin, capital efficient growth.”, Jeff Immelt, CEO
• 2001- GE Top e-business innovator (eweek)
www.ge.com
GE – Digitization Strategy
IT Spending
2000 - $2.5 billion
2001 - $3.0 billion
2002 - $3.5 billion
Gary Reiner, CIO
"You won't see one ounce of slowdown in tech spending.”
Jack Welch 1/2001
http://www.eweek.com/article2/0,3959,94717,00.asp
GE – Digitization Strategy
Buy
Make
Productivity (“Workflow”)
Sell
More Share/
Higher
Margin
• Negotiate
• Eliminate
• Make the Customer More
–
eIntermediari
Productive
Auctions
–
es
–
Comparative
Deflation
–
Speed
Performance Data
–
Unit Cost
–
Customized Service
• Transact
–
(Availability/Order
Productivity
Reduction
Service)
–
–
• Transaction Productivity
eTransactions
Streamline
GE Internal Presentation
– Control
processes
e-Business Value
Customer Value
GE Value
Buy smarter
Process more efficiently
Sell more
Buy smarter
Process more efficiently
Sell more
e@GE
Digitization provides ways to improve our customer
interface and work on our own internal productivity at the
same time. It is just beginning. Our investments in
information technology will grow about 15% this year. It is
really going to help us transform the cost base of GE. Its
going to help us buy better. Its going to help us interface
with customers better. But primarily its going to help us in
terms of the inner workings of GE make us more efficient,
leaner, and closer to the customer."
-- Jeff Immelt, Chairman and CEO
Customer City Swings, April 2001
e-Business Organizational Approach
CEO
Marketing
Leader
e-Business
Leader
BD
Leader
High Level Leader
Knows the Business
Track Record of Delivering
Well Respected - Great Team
Player/Influencer
• Understands Commercial &
Operations
• Has or Can Play on Business
Leader Staf
•
•
•
•
CIO
e-Business Steering
Committee
Buy Side
e-Commerce
Leader
Other
e-Business
Functional
Leaders
DYB.com/GYB.com Leader
Focus: Destroy Your
Business/ Grow Your
Business
•
•
•
•
•
CEO
e-Business Leader
CIO
Marketing Leader
BD Leader
Cross Functional Team
Marketing
Sales
• External or Internal
• Internet Generation
• Creative,
Entrepreneurial
• Start Up Experience
• Marketing/IT
Background
Operation
s
Chief Architect
.Com Technical Team
Technical
Functionality
Back End
Infrastructure
GE Internal Presentation
• External Hire
CWC.com Leader
• e-Commerce Industry
Focus: Enhance & Build
Experience
Your Customer Web Center • Business Savvy
• Technical Expertise
Cross Functional Team
Marketing
Sales
Operations
e@GE Statistics
Sell
140
Dollars (billions)
120
100
On Line Revenue
80
Overall Revenue
60
Profit (overall)
40
20
0
2000
2001
Online Revenue as a percentage of total revenue
2002
%
1999
16
14
12
10
8
6
4
2
0
1999
2000
After a year of trying web sales, “it really hadn’t changed the world.”
Gary Reiner, CIO GE, Forbes 4/30/2001
GE Annual Reports
2001
2002
e@GE - Sell
Plastics-Overview
Company
Leading global manufacturer and distributor of plastics resins
and plastics, including polycarbonate, ABS, SAN, ASA, PPE,
PC/ABS, PBT and PEI resins.
• 10K employees
• $5.3 Billion in sales
•
Customers
Automotive (i.e. Ford), computers (i.e. Dell),
telecommunications, appliances, optical media, packaging, and
building and construction
www.geplastics.com
e@GE - Sell
Plastics-Overview
• 1994 - 1,500 pages of corporate literature, product information,
press announcements, photographs, and design guides on the Net
• 1997 - First to sell resins on the web
• Today
• industry's leading e-Commerce Web site
•
•
•
•
speeding up and simplifying the whole range of customer services
Voted best of the web (Forbes 9/18/2002)
Full service portal
200,000 registered users, 20K visits/week, 2,000 pages of online material
e@GE - Sell
Plastics-Overview
gepolymerland.com
• Web site designed to give an easy, super-fast way to manage a resin
business
• Provides information needed to stay on top of your business
• Available 24 hours a day, seven days a week.
“it's all about speed, efficiency and making every minute count”
www.gepolymerland.com
e@GE - Sell
gepolymerland.com
•
•
Buy
• Discussion groups
• Real time orders online FAST
• Shipping confirmation in minutes
• Track and trace shipments
• MSDS and Certifications online
• secure Company information
• Chats
• Career center
• Calendar
• Yellow Pages
• Research
• Design Services
• Material selection database
• Part/toll design assistance
• Computer-aided engineering services
• Design questions
Interact
• Technical Tips and case studies
• Problem solving guidelines
• Technical inquiries
• Literature online
“it's all about speed, efficiency and making every minute count”
www.gepolymerland.com
e@GE - Sell
Plastics-Performance
9
7
6
14% growth primarily
attributed to e-business
initiatives
Online Revenue
5
Overall Revenue
4
Profit (overall)
3
2
1
0
20
1995 1996 1997 1998 1999 2000 2001 2002
15
10
5
0
%
Revenue $ (Billions)
8
-5
-10
1996
1997
1998
1999
2000
2001
% Revenue Growth
% Profit Growth
-15
-20
-25
-30
-35
2001 GE Annual Report & http://www.line56.com/articles/default.asp?ArticleID=4086&ml=3
e@GE - Sell
Plastics-Summary
• Information on the net helps customers operate more productively
and save money
• product information
• warehouse inventory
• shipment status
• 24x7 convenience
Chemical Week 5/10/2000
e@GE - Sell
Plastics-Summary
• Beyond transactions-long term value creation
• Aim to draw in engineers, plant managers, and others
• ColorXpress: allows customers to match and order color chips;
• Vendor Managed Inventory (VMI): uses a proprietary online monitoring technology to monitor
storage silos and stabilize order patterns for customers
• Design Solution Center:offers a full range of online technical software tools to aid in application
development.
• Content encourages repeat visits
• Customer support/technical assistance
• Educational offerings (online seminars)
• 500 events in 2001
• multilingual
• reached 15,000 customers
• Continually broadening its interactive base of knowledge
www.geplastics.com
e@GE - Sell
Appliances-Overview
Company
• GEA is nearly a $6 billion business in North America,
Europe, Asia and South America.
• Each year GEA sells more than 15 million appliances in
150 world markets under the Monogram®, GE Profile™,
GE®, and Hotpoint® brand names.
www.geappliances.com
e@GE - Sell
Appliances-Overview
Products
•
•
•
•
•
refrigerators
freezers
ranges
dishwashers
washing machines
•
•
•
•
•
•
Customers
Retailers
Individuals
dryers
microwave ovens
speed cooking ovens
room air conditioners
water filtration
softening and heating systems
e@GE - Sell
Appliances-Overview
Kiosk based virtual inventory model
• Program allows customers to walk into a Home Depot or WalMart store, buy an appliance online at a kiosk, and select a
delivery date/time
• Web based systems at GE warehouses help coordinate
fulfillment and promise deliveries within 15 minutes of
customer specification
• Manufacturer assumes all warehousing, delivery, and
installation duties
• Goal: Making channel partners more successful
“direct ship is going to be the differentiating factor for competition in the future. There is too
much redundancy in the way that business is conducted.”
Larry Johnston, CEO GE Appliances
Wolf, Alan, “GE’s Johnston: Why the Web is Imperative,” Twice 10/23/2000
e@GE - Sell
Appliances-Performance
7
5
4
Overall Revenue
3
Profit (overall)
2
1
0
1995
1996
1997
1998
1999
2000
2001
15
10
5
0
%
Dollars (billions)
6
-5
1996
-10
-15
-20
GE Annual Reports
1997
1998
1999
2000
2001
% Revenue Growth
% Profit Growth
e@GE - Sell
Appliances-Summary
• Retail Win
• No capital commitment by merchant
• Registering sales of products that are not physically there
• Elimination of inventory and delivery costs
• Customer Win
• Precision fulfillment system
• GE Win
• Increase revenue
“Something as un-sexy as logistics has become the game changer.”
GE Spokesperson
Wolf, Alan, “Wal-mart Enters Majap Program with GE Appliance Pilot Program,” Twice 9/4/2000
e@GE - Sell
Aircraft Engines
• B2B web center that enables real-time transactions with 300
customers 24x7
• Catalog of 250,000 parts
• Order entry
• Inventory status
• Order/shipping status
• Account information
• Value added services
• Enhancing customer productivity
• Saved parts list
• Configuration histories
• Advanced search tools
• On-line troubleshooting using fiber optic video
Competitors Pratt & Whitney or Rolls Royce have yet to develop anywhere near as effective a Web Strategy as GE.
http://www.cio.com/sponsors/050100_ebiz_story2_side5.html & http://www.forbes.com/best/2000/0717/038s01.html
e@GE - Sell
Power Systems
Turbine Optimizer
•
•
•
•
Web based tool
Compares turbine performance with same models across the world
Shows dollar value of improvement
Ability to schedule service call for improvement
“It used to take 2 weeks to
analyze a problem, now it
only takes an hour.”
http://www.forbes.com/best/2000/0717/038s01.html
e@GE – Make
Internal Processes Overview
• Eliminate manual processes
• Eliminate paper generating processes
• Increases volume per sales rep
• Reduce back office processes and increase front office face
time with customer
“Every process we can digitize will help reduce our costs and further increase our
speed -- both key competitive advantages in today's marketplace .”
GE Internal Presentation
e@GE – Make
Internal Processes Overview
• Finance
• HR
• Employee Evaluations
• Employee Applications
• Sales
• invoicing
• reconciling
e@GE – Make
Internal Processes Overview
• Travel
• Booking
• Expensing
• 2001 savings: $200 million in improved
efficiencies and reduced travel
• Support Central
• Education
GE Internal Presentation
e@GE – Make
Internal Processes
Stakeholders
• Employees
• Management
• Stockholders
• Customers
e@GE – Make
Internal Processes
2000 - $1.5 billion savings on streamlined internal processes
Future - ~$10 billion in savings
e-Make is about streamlining processes and reducing unit costs
http://www.pcmag.com/article2/0,4149,33527,00.asp
e@GE – Buy
Stakeholders
• Management
• Stockholders
e@GE – Buy
Negotiate
e-Auction “Everything”
• real-time online purchasing auction for both incumbent and
non-incumbent GE suppliers
• reverse auction
• allows GE purchasing managers to monitor competitive
pricing and drive down total costs
• $3 billion worth of goods and services on auction (2000)
• businesses achieved 10-20% price deflation across the board
GE Internal Presentation
e@GE – Buy
Transact
Capture
Digitally Capture All PO’s, Invoices, Payments
• easier to obtain current data
• fewer errors in purchase orders
• quicker turnaround reconciling bills
GE Internal Presentation
e@GE – Buy
Supplier Workflow
e-P0
e-Inv
e-Pay
Date
%
Date
%
Date
%
NBC
J an-01
100%
Dec-01
85%
Sep-01
93%
APPLIANCES
Mar-01
100%
May-01
100%
Dec-01
100%
LIGHTING
May-01
95%
J un-01
90%
J un-01
100%
AIRCRAFT
J un-01
100%
J un-01
100%
J un-01
100%
TRANS
J un-01
100%
Dec-01
100%
Dec-01
100%
PLASTICS
Dec-01
100%
Dec-01
100%
Sep-01
100%
INDUSTRIAL
Dec-01
95%
Dec-01
90%
Dec-01
90%
MEDICAL
Dec-01
95%
Dec-01
95%
Dec-01
95%
CAPITAL
Dec-01
85%
Dec-01
90%
Dec-01
75%
SUPPLY
Dec-01
80%
Dec-01
90%
Oct-01
100%
POWER
Dec-01
65%
Dec-01
80%
Dec-01
70%
GE Internal Presentation
e@GE – Buy
Constrict
Usage
–
Implement Automated Workflow Approvals
–
5% on $20B = $1B
Contract Adherence
– Establish One Data Source for Pre-Negotiated
Contracts
–
3% on $20B = $600M
Productivity
–
Streamline Sourcing Process
–
5% of 3000 people = $20M
GE Internal Presentation
e@GE – Buy
Summary
• Savings
2001: Anticipated $600 million in savings
• Transactions
2000: $6 billion transactions
2001: $15 billion transactions
Future: $30 billion transactions
e-Buy is about buying smarter and processing more efficiently
http://www.pcmag.com/article2/0,4149,33527,00.asp
e-Business Value
Customer Value
GE Value
Buy smarter
Process more efficiently
Sell more
Buy smarter
Process more efficiently
Sell more
Competitive Advantage through diferentiation (value added
customer services) and cost reduction
e@GE
e-Business strategy
continues to build on the
business model that has
enabled the company to
outpace S&P 500 earnings
growth through every
cycle
http://www.ge.com
e@GE
Digitization mandate - Straight from the top
IT – leveraged to cut costs and differentiate
Differentiation
• Online tools and services
• Increased front office operations
“Digitization is changing our relationship with our customer. At the
customer for the customer (ACFC)-the way that we differentiate.”
http://www.ge.com
IT as a Competitive Weapon Sustainability
Sustainable Advantage
Do our case studies have sustainable advantage
?
Supply
Project Lifecycle Analysis
Competitor
Analysis
Sabre
GE (Plastics, Appliances)
Lead Time
Competitive
Asymmetry
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
System
Analysis
Pre-emption
Potential
Web Business
Staying Power
•
•
•
•
•
•
Simplicity
Applying traditional business thinking to a new channel
Use web to improve business and create valuable services
Awareness of customer needs
e-Business is a constantly moving target
Need for sound relationships
http://www.cio.com/archive/120101/power_content.html
Davidson, Stephen, “B2B Exchaanges:Lessons from the Trading Pit,” Journal of Internet Law, 4/2002, v5 i10 p1(10)
IT as a Competitive Weapon Summary
IT can be used as a competitive weapon through cost
reduction and differentiation
Very few companies sustain competitive advantage using
IT
IT projects need to be evaluated for “sustainability’
in addition to traditional risk
e-Business is a constantly moving target
Future of IT
Competitive Advantage?
or
Competitive Necessity?
Using Information Technology
for Competitive Advantage
Jolanta Zadlo & Gary Gray
IT as a Competitive Weapon
IT and Competitive Advantage
Sustainability of Competitive Advantage
Case Studies
Sabre
GE
Conclusion
Definition:
Information Technology
Information Technology (IT) is the
amalgamation of hardware, software, data,
people and procedures that enables or inhibits
business objectives depending on
management’s involvement in IT.
Source: Why General Managers Need to Understand
Information Technology, lecture notes, Lacity, 2002
How the information revolution
affects competition
Changes industry structure thereby altering
the rules of competition
Creates competitive advantage by giving
new ways to outperform rivals
Spawns whole new businesses
Source: How information gives you competitive advantage,
Porter and Millar, 1985
How IT creates a competitive
advantage
Differentiate a product or service
Improve business processes (lower costs)
Change a business structure
Create new business
Source: IS 480 lecture notes, Lacity, 2002
Competitive advantage comes
from critical differentiators
Critical
Critical
Commodities
Critical
Differentiators
Useful
Useful
Commodities
Eliminate/Migrate
Commodity
Source: IS 480 lecture notes, Lacity, 2002
Differentiator
IT as a Competitive Weapon Sustainability
Very few companies sustain their competitive edge over
the long term
Sustainability occurs when it is difficult or impossible
for the competition to respond
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
IT Resources-Easily Duplicated
• Capital for investment
• Proprietary technology
• Technical Skills
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
IT Resources-NOT Easily Duplicated
Managerial IT Skills
• Understanding business needs
• Collaborating with colleagues
• Managing market & technical risk of innovation
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
IT as a Competitive Weapon Sustainability
Sustainable Advantage
1. How long before a competitor responds?
Supply
Project2.
Life-Which competitors
Competitorcan/will respond?
System
cycle Analysis
Analysis
Analysis
3. Will the response be effective?
Lead Time
Competitive
Asymmetry
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
Pre-emption
Potential
IT as a Competitive Weapon Sustainability
3 Pillars Supporting Sustainable Advantage
• Lead Time
• Information leaks
• Followers take short cuts
• Followers implement better solutions
• Competitor Analysis
(Difficulty of competitor to respond or copy application)
• Supply system analysis
• Market capture
• Switching costs
Case studies selected:
AmericanAirlines
General Electric Company
Sabre Holdings Corporation
Current Company
Background
S&P Fortune 500 Company
$2.1B in revenues in 2001
TSG – “The Sabre Group”
Traded on the NYSE – 1996
Current Price – about $21
Headquarters – Dallas/Fort Worth, TX
Source: www.sabre.com
Sabre Holdings Corporation
Current Company Background
7,000 employees in 45 countries
Sabre connects more than 60,000
travel agency locations worldwide,
providing content for 400 airlines
(complete flight data, seat maps, etc) ,
55,000 hotel properties (room availability, type, price), 52 car
rental companies, nine cruise lines, 33 railroads and 229 tour
operators.
Source: www.sabre.com
Sabre Holdings Corporation
Financial Data
Revenues in Billions
Earnings in Millions
$2.5
$350
$300
$2.0
$250
$1.5
$200
$150
$1.0
$100
$0.5
$0.0
$50
1997
1998
1999
2000
2001
$0
1997
1998
1999
2000
2001
Revenues from operations declined 19% in 2001 due to
9/11 events and lower US and worldwide travel volumes, but
were more than compensated for by revenue from
outsourcing to EDS, profits did not fare as well.
Source: Sabre’s 2001 Summary Annual Report
Sabre Holdings Corporation
Financial Picture
2001 Revenues by Business
GetThere
2%
Airline
Solutions
9%
Travelocity
11%
Travel
Marketing &
Distribution
78%
Source: Sabre’s 2001 Summary Annual Report
Sabre Holdings Corporation
Information Technology
Both Carol Kelly, Senior VP and CIO,
and Craig Murphy, Senior VP and CTO
report to the CEO
Sabre outsourced its mainframe and data center to
EDS. However, Sabre has retained a sizeable
investment in IT.
Source: Interview of Jim Menge, VP Technology Sales, Sabre
What is Sabre
SemiAutomatic
Business
Research
Environment
Source: Computerworld, Technology Takes Flight, Sep 2002
IT to Improve Business Processes:
American Airlines developed Sabre to
automate the process of reserving airline seats.
Source: Computerworld, Technology Takes Flight, 9/02
American Airlines:
improves a business process
1959 – American Airlines (AA) and
IBM sign a contract for the joint
development of a real-time reservation
system that combines in a centralized
electronic unit, 2 basic reservation
records – the passenger name record
(PNR) and the seat inventory. AA
spends $150M on the development of
the system. Sabre was based upon
technology created by MIT for DOD.
Source: Data Management, Sep 1981 & Computerworld Mar 1999
American Airlines:
improves a business process
AA’s reservation process used a system based on computer
cards and teletypes and required the efforts of 12 people, at
least 15 steps and up to 3 hours to record
a roundtrip reservation.
The error rate was 8%.
Sabre reduced costs and the error rate.
Source: www.sabre.com
American Airlines:
improves a business process
1960 – American Airlines (AA) installed the first Sabre
system, a computer reservation system (CRS). Represented
state-of-the-art technology and processed 84,000 calls per day.
Research, development and installation cost $40 million with
an investment of 400 man-years of effort.
Source: www.sabre.com
American Airlines:
improves a business process
1964 – AA completes cutover to Sabre with a
coast to coast network in the US.
Sabre is the largest, private real-time data
processing system.
Source: www.sabre.com
Competitive Edge
Competitive advantage from process change
Source: www.sabre.com
Competitive Edge
AA saved 30% of its investment in staff alone
Sabre delivers an error rate of less than 1%
Sabre creates a competitive edge that lasts for
5 to 7 years
Source: www.sabre.com
Competitive Edge
Other CRS providers today:
Apollo – rolled out by United in 1976
Worldspan – Delta, Northwest and TWA
Amadeus – largest foreign owned CRS
Sabre continues as the industry leader today
Worldspan is the only airline owned CRS
Source: www.sabre.com and BTMC records
Sabre System History – 1970s
1972 – Sabre system upgraded to IBM 360s
1976 – Sabre system first installation
in a travel agency – by year end 130 locations
and captured about 86% of the market
United Airlines introduces Apollo
1978 – Sabre stores 1M fares
Source: www.sabre.com
Sabre System History – 1980s
1981 – Sabre has a slight market share advantage
over Apollo
The competitive edge has all but disappeared
1981 – AA introduces the first airline frequent flyer
program
1984 – Sabre introduces low-fare search engine – a
service unmatched in the industry
Sources: Business Week, Aug 1982, Direct Marketing, Jul 1983
and www.sabre.com
Sabre System History – 1980s
1985 – AA allows travel agencies to use personal
computers to tap into the Sabre system via computer
online services to access airline, hotel and car rental
reservations
1986 – AA/Sabre installs the industry’s first
automated yield management system
1988 – Sabre system stores 36 million fares
Source: www.sabre.com
Sabre System History – 1980s
1987 – With airlines in their 8th year of deregulation,
information and transaction processing has become more
profitable than selling seats. AA’s Sabre System produced
pretax margins of 30% vs. 5.2% percent from tickets.
Source: Business Week, 1987
Sabre System History – 1980s
1988 – Sabre system stores 36 million fares
1989 – A computer foul-up shut down AA’s Sabre ticketing
system for 12 hours, apparently the result of a glitch written
into the system. The system failure left 14,000 travel agencies
and a large part of AA without flight information.
Lesson ?
Sources: New York Times and Business Week, 1989
Sabre System History – 1990s
1995 – Sabre begins to prepare for Y2K –
software is distributed to 40,000 travel agents
in 1998. Y2K costs estimated at $78M.
1996 – Sabre names its first CIO
Source: www.sabre.com & Computerworld, May 1996 and
Computerworld, Mar 1998
The Web Threat
Airlines begin to focus on the Web as a
means to further reduce their
distribution costs
Source: www.sabre.com
A New Way to Cut Costs
1995 – AA and all major US carriers reduce
travel agency commissions on domestic flights.
Commission is capped at $50.
Additional reductions are made in 1997 (% decreased from 10%
to 8%), 1998 (international commissions capped at $100), 1999
(% decreased to 5%), 2001 (domestic caps reduced to $20) and
2002 (commissions eliminated)
Source: www.sabre.com and BTMC records
Sabre System History – 1990s
1996 – Sabre becomes a separate
subsidiary of AMR and AMR releases 18%
to be publicly traded (total spin-off in
2000)
Source: www.sabre.com
Sabre System History – 1990s
1996 –– Travelocity.com, currently the industry’s
leading online consumer travel website is launched.
Source: www.sabre.com
Sabre System History – 1990s
By 1998 Sabre had evolved into a global
distribution system (GDS) for travel reservations
connecting more than 30,000 travel agents and 3
million online customers with 400 airlines, 50 car
rental companies, 35,000 hotels and dozens of
railways, tour companies and cruise lines.
About 1% of all airline tickets are purchased on the
web in early 1998.
Source: Computerworld, Sep 2002 & Forbes, Apr 1998
Sabre System History – 1990s
1999 – Sabre®Virtually There™, a web based
system that provides travelers itinerary and destination
info via the internet
Source: www.sabre.com
The Web Threat
1995 – Sabre considers development of the
first corporate online booking tool – BTS. The
project is incubated for 2 to 3 years.
1997 – Development of the BTS begins.
1998 – BTMC agrees to beta test Sabre’s BTS
for Boeing travelers.
Source: interview and BTMC records
Online Booking
1998 – Sabre is unable to expand BTS to be a multiCRS system.
1999 – BTMC terminates agreement with Sabre and
signs with small startup firm – Internet Travel
Network for a multi-CRS system.
BTS is available today in a Spanish version which is
still in use today.
Source: BTMC interview and BTMC records
Online Booking
2000 – Sabre acquires GetThere.com, formerly
Internet Travel Network for $757M. GetThere’s
online product is currently the leading provider of
online booking solutions. Purchase completed to gain
customer base and keep competitors from purchasing.
Sources: www.sabre.com, interview & Computerworld, Aug 2000
The Web Threat
Sabre’s recent response to the web which
threatens its core business model
- Sabre signs deals with Hotwire.com and
Priceline.com to provide key technology – both
companies are also competitors of Sabre’s
Travelocity.com
Source: Computerworld, Aug 2000
The Initial Outsourcing
In August 1996, Sabre signed a 7 year outsourcing
deal which transferred responsibility for its travel
reservations network. A partnership of Paris-based
airline network SITA and Atlanta-based Equant
essentially purchased the network for $450M for 7
years. Sabre transferred 80% of its network engineers
to SITA.
Source: Computerworld, December 1997
Outsourcing a mature product
In July 2001, Sabre signed a 10 year, $2.2B
outsourcing contract with EDS. EDS purchased
Sabre’s IT infrastructure assets and data centers and
Sabre’s airline technology outsourcing business. Over
4,000 Sabre employees transferred to EDS. This
transaction represented $600M in revenue to Sabre.
Source: Computerworld July 2001 and interview
The Future
Sabre continues to develop and release new
products on an ever increasing pace.
Continued change required to maintain
customer satisfaction. Revenues from the
traditional CRS/GDS model must be replaced
by new lines of business.
Success with IT:
Strategies
1980’s: Killer Application
• AA/UA-Reservation Systems
• American Hospital Supply-Online ordering system
• Frito-Lay-Handheld devices for sales
Early 1990’s: Re-engineering
• Redesigning business processes around technology
Mid 1990’s: Information Management
• Knowledge Management
• ERP
• CRM
http://www.cio.com/archive/050101/davenport_content.html
Success with IT:
Strategies
Late 1990’s: e-Commerce
Today
•
•
•
•
•
e-Commerce is not enough
IT investment in the business core (touches customer)
Business commitment
Commitment to change (continually re-invent and never rest)
Using multiple technologies and management approaches (not
just one)
• Company must excel in front office(e-commerce, CRM) , back
office (ERP), and data warehousing, mining, and KM
• Information focus (to make smart decisions)
http://www.cio.com/archive/050101/davenport_content.html
It’s All About “E”
Overview
Strategy
e@GE
Summary
Case Study:
General Electric
• Company Overview
• Digitization Strategy
• Examples
• Buy Side
• Plastics
• Appliances
• Power Systems
• Aircraft Engines
• Sell Side
• Make Side
• Summary
e-business Is Business Just Simpler, Faster, and Better
General Electric:
Company Overview
• Formed in 1892
• Only company part of the Dow Jones's Industrial Index since the
Index’s debut
• 67,588 patents, 2 Nobel Prizes and numerous other honors
• Operates in more than 100 countries and employs 313,000 people
worldwide
• GE is considered to be one of the largest and most diversified
industrial corporations in the world
www.ge.com
General Electric:
Company Overview
• Short-cycle businesses contributed approximately 20% of GE's net earnings in
2001
• Consumer Products (Lighting & Appliances)
• Plastics
• Industrial Systems
• NBC
• Specialty Materials
• Long-cycle businesses contributed approximately 40% of GE's net earnings
in 2001
• Medical Systems
• Power Systems
• Transportation Systems
• Aircraft Engines
• Financial services contributed approximately 40% of GE's net earnings in 2001
GE – Digitization Strategy
• Before 1999 - IT at GE was non existent
• 1999 - Jack Welch orders each business to “Destroy your
business/ Grow your business”
• Use information technology to “create a leaner, faster,
more customer focused company, accelerate high
margin, capital efficient growth.”, Jeff Immelt, CEO
• 2001- GE Top e-business innovator (eweek)
www.ge.com
GE – Digitization Strategy
IT Spending
2000 - $2.5 billion
2001 - $3.0 billion
2002 - $3.5 billion
Gary Reiner, CIO
"You won't see one ounce of slowdown in tech spending.”
Jack Welch 1/2001
http://www.eweek.com/article2/0,3959,94717,00.asp
GE – Digitization Strategy
Buy
Make
Productivity (“Workflow”)
Sell
More Share/
Higher
Margin
• Negotiate
• Eliminate
• Make the Customer More
–
eIntermediari
Productive
Auctions
–
es
–
Comparative
Deflation
–
Speed
Performance Data
–
Unit Cost
–
Customized Service
• Transact
–
(Availability/Order
Productivity
Reduction
Service)
–
–
• Transaction Productivity
eTransactions
Streamline
GE Internal Presentation
– Control
processes
e-Business Value
Customer Value
GE Value
Buy smarter
Process more efficiently
Sell more
Buy smarter
Process more efficiently
Sell more
e@GE
Digitization provides ways to improve our customer
interface and work on our own internal productivity at the
same time. It is just beginning. Our investments in
information technology will grow about 15% this year. It is
really going to help us transform the cost base of GE. Its
going to help us buy better. Its going to help us interface
with customers better. But primarily its going to help us in
terms of the inner workings of GE make us more efficient,
leaner, and closer to the customer."
-- Jeff Immelt, Chairman and CEO
Customer City Swings, April 2001
e-Business Organizational Approach
CEO
Marketing
Leader
e-Business
Leader
BD
Leader
High Level Leader
Knows the Business
Track Record of Delivering
Well Respected - Great Team
Player/Influencer
• Understands Commercial &
Operations
• Has or Can Play on Business
Leader Staf
•
•
•
•
CIO
e-Business Steering
Committee
Buy Side
e-Commerce
Leader
Other
e-Business
Functional
Leaders
DYB.com/GYB.com Leader
Focus: Destroy Your
Business/ Grow Your
Business
•
•
•
•
•
CEO
e-Business Leader
CIO
Marketing Leader
BD Leader
Cross Functional Team
Marketing
Sales
• External or Internal
• Internet Generation
• Creative,
Entrepreneurial
• Start Up Experience
• Marketing/IT
Background
Operation
s
Chief Architect
.Com Technical Team
Technical
Functionality
Back End
Infrastructure
GE Internal Presentation
• External Hire
CWC.com Leader
• e-Commerce Industry
Focus: Enhance & Build
Experience
Your Customer Web Center • Business Savvy
• Technical Expertise
Cross Functional Team
Marketing
Sales
Operations
e@GE Statistics
Sell
140
Dollars (billions)
120
100
On Line Revenue
80
Overall Revenue
60
Profit (overall)
40
20
0
2000
2001
Online Revenue as a percentage of total revenue
2002
%
1999
16
14
12
10
8
6
4
2
0
1999
2000
After a year of trying web sales, “it really hadn’t changed the world.”
Gary Reiner, CIO GE, Forbes 4/30/2001
GE Annual Reports
2001
2002
e@GE - Sell
Plastics-Overview
Company
Leading global manufacturer and distributor of plastics resins
and plastics, including polycarbonate, ABS, SAN, ASA, PPE,
PC/ABS, PBT and PEI resins.
• 10K employees
• $5.3 Billion in sales
•
Customers
Automotive (i.e. Ford), computers (i.e. Dell),
telecommunications, appliances, optical media, packaging, and
building and construction
www.geplastics.com
e@GE - Sell
Plastics-Overview
• 1994 - 1,500 pages of corporate literature, product information,
press announcements, photographs, and design guides on the Net
• 1997 - First to sell resins on the web
• Today
• industry's leading e-Commerce Web site
•
•
•
•
speeding up and simplifying the whole range of customer services
Voted best of the web (Forbes 9/18/2002)
Full service portal
200,000 registered users, 20K visits/week, 2,000 pages of online material
e@GE - Sell
Plastics-Overview
gepolymerland.com
• Web site designed to give an easy, super-fast way to manage a resin
business
• Provides information needed to stay on top of your business
• Available 24 hours a day, seven days a week.
“it's all about speed, efficiency and making every minute count”
www.gepolymerland.com
e@GE - Sell
gepolymerland.com
•
•
Buy
• Discussion groups
• Real time orders online FAST
• Shipping confirmation in minutes
• Track and trace shipments
• MSDS and Certifications online
• secure Company information
• Chats
• Career center
• Calendar
• Yellow Pages
• Research
• Design Services
• Material selection database
• Part/toll design assistance
• Computer-aided engineering services
• Design questions
Interact
• Technical Tips and case studies
• Problem solving guidelines
• Technical inquiries
• Literature online
“it's all about speed, efficiency and making every minute count”
www.gepolymerland.com
e@GE - Sell
Plastics-Performance
9
7
6
14% growth primarily
attributed to e-business
initiatives
Online Revenue
5
Overall Revenue
4
Profit (overall)
3
2
1
0
20
1995 1996 1997 1998 1999 2000 2001 2002
15
10
5
0
%
Revenue $ (Billions)
8
-5
-10
1996
1997
1998
1999
2000
2001
% Revenue Growth
% Profit Growth
-15
-20
-25
-30
-35
2001 GE Annual Report & http://www.line56.com/articles/default.asp?ArticleID=4086&ml=3
e@GE - Sell
Plastics-Summary
• Information on the net helps customers operate more productively
and save money
• product information
• warehouse inventory
• shipment status
• 24x7 convenience
Chemical Week 5/10/2000
e@GE - Sell
Plastics-Summary
• Beyond transactions-long term value creation
• Aim to draw in engineers, plant managers, and others
• ColorXpress: allows customers to match and order color chips;
• Vendor Managed Inventory (VMI): uses a proprietary online monitoring technology to monitor
storage silos and stabilize order patterns for customers
• Design Solution Center:offers a full range of online technical software tools to aid in application
development.
• Content encourages repeat visits
• Customer support/technical assistance
• Educational offerings (online seminars)
• 500 events in 2001
• multilingual
• reached 15,000 customers
• Continually broadening its interactive base of knowledge
www.geplastics.com
e@GE - Sell
Appliances-Overview
Company
• GEA is nearly a $6 billion business in North America,
Europe, Asia and South America.
• Each year GEA sells more than 15 million appliances in
150 world markets under the Monogram®, GE Profile™,
GE®, and Hotpoint® brand names.
www.geappliances.com
e@GE - Sell
Appliances-Overview
Products
•
•
•
•
•
refrigerators
freezers
ranges
dishwashers
washing machines
•
•
•
•
•
•
Customers
Retailers
Individuals
dryers
microwave ovens
speed cooking ovens
room air conditioners
water filtration
softening and heating systems
e@GE - Sell
Appliances-Overview
Kiosk based virtual inventory model
• Program allows customers to walk into a Home Depot or WalMart store, buy an appliance online at a kiosk, and select a
delivery date/time
• Web based systems at GE warehouses help coordinate
fulfillment and promise deliveries within 15 minutes of
customer specification
• Manufacturer assumes all warehousing, delivery, and
installation duties
• Goal: Making channel partners more successful
“direct ship is going to be the differentiating factor for competition in the future. There is too
much redundancy in the way that business is conducted.”
Larry Johnston, CEO GE Appliances
Wolf, Alan, “GE’s Johnston: Why the Web is Imperative,” Twice 10/23/2000
e@GE - Sell
Appliances-Performance
7
5
4
Overall Revenue
3
Profit (overall)
2
1
0
1995
1996
1997
1998
1999
2000
2001
15
10
5
0
%
Dollars (billions)
6
-5
1996
-10
-15
-20
GE Annual Reports
1997
1998
1999
2000
2001
% Revenue Growth
% Profit Growth
e@GE - Sell
Appliances-Summary
• Retail Win
• No capital commitment by merchant
• Registering sales of products that are not physically there
• Elimination of inventory and delivery costs
• Customer Win
• Precision fulfillment system
• GE Win
• Increase revenue
“Something as un-sexy as logistics has become the game changer.”
GE Spokesperson
Wolf, Alan, “Wal-mart Enters Majap Program with GE Appliance Pilot Program,” Twice 9/4/2000
e@GE - Sell
Aircraft Engines
• B2B web center that enables real-time transactions with 300
customers 24x7
• Catalog of 250,000 parts
• Order entry
• Inventory status
• Order/shipping status
• Account information
• Value added services
• Enhancing customer productivity
• Saved parts list
• Configuration histories
• Advanced search tools
• On-line troubleshooting using fiber optic video
Competitors Pratt & Whitney or Rolls Royce have yet to develop anywhere near as effective a Web Strategy as GE.
http://www.cio.com/sponsors/050100_ebiz_story2_side5.html & http://www.forbes.com/best/2000/0717/038s01.html
e@GE - Sell
Power Systems
Turbine Optimizer
•
•
•
•
Web based tool
Compares turbine performance with same models across the world
Shows dollar value of improvement
Ability to schedule service call for improvement
“It used to take 2 weeks to
analyze a problem, now it
only takes an hour.”
http://www.forbes.com/best/2000/0717/038s01.html
e@GE – Make
Internal Processes Overview
• Eliminate manual processes
• Eliminate paper generating processes
• Increases volume per sales rep
• Reduce back office processes and increase front office face
time with customer
“Every process we can digitize will help reduce our costs and further increase our
speed -- both key competitive advantages in today's marketplace .”
GE Internal Presentation
e@GE – Make
Internal Processes Overview
• Finance
• HR
• Employee Evaluations
• Employee Applications
• Sales
• invoicing
• reconciling
e@GE – Make
Internal Processes Overview
• Travel
• Booking
• Expensing
• 2001 savings: $200 million in improved
efficiencies and reduced travel
• Support Central
• Education
GE Internal Presentation
e@GE – Make
Internal Processes
Stakeholders
• Employees
• Management
• Stockholders
• Customers
e@GE – Make
Internal Processes
2000 - $1.5 billion savings on streamlined internal processes
Future - ~$10 billion in savings
e-Make is about streamlining processes and reducing unit costs
http://www.pcmag.com/article2/0,4149,33527,00.asp
e@GE – Buy
Stakeholders
• Management
• Stockholders
e@GE – Buy
Negotiate
e-Auction “Everything”
• real-time online purchasing auction for both incumbent and
non-incumbent GE suppliers
• reverse auction
• allows GE purchasing managers to monitor competitive
pricing and drive down total costs
• $3 billion worth of goods and services on auction (2000)
• businesses achieved 10-20% price deflation across the board
GE Internal Presentation
e@GE – Buy
Transact
Capture
Digitally Capture All PO’s, Invoices, Payments
• easier to obtain current data
• fewer errors in purchase orders
• quicker turnaround reconciling bills
GE Internal Presentation
e@GE – Buy
Supplier Workflow
e-P0
e-Inv
e-Pay
Date
%
Date
%
Date
%
NBC
J an-01
100%
Dec-01
85%
Sep-01
93%
APPLIANCES
Mar-01
100%
May-01
100%
Dec-01
100%
LIGHTING
May-01
95%
J un-01
90%
J un-01
100%
AIRCRAFT
J un-01
100%
J un-01
100%
J un-01
100%
TRANS
J un-01
100%
Dec-01
100%
Dec-01
100%
PLASTICS
Dec-01
100%
Dec-01
100%
Sep-01
100%
INDUSTRIAL
Dec-01
95%
Dec-01
90%
Dec-01
90%
MEDICAL
Dec-01
95%
Dec-01
95%
Dec-01
95%
CAPITAL
Dec-01
85%
Dec-01
90%
Dec-01
75%
SUPPLY
Dec-01
80%
Dec-01
90%
Oct-01
100%
POWER
Dec-01
65%
Dec-01
80%
Dec-01
70%
GE Internal Presentation
e@GE – Buy
Constrict
Usage
–
Implement Automated Workflow Approvals
–
5% on $20B = $1B
Contract Adherence
– Establish One Data Source for Pre-Negotiated
Contracts
–
3% on $20B = $600M
Productivity
–
Streamline Sourcing Process
–
5% of 3000 people = $20M
GE Internal Presentation
e@GE – Buy
Summary
• Savings
2001: Anticipated $600 million in savings
• Transactions
2000: $6 billion transactions
2001: $15 billion transactions
Future: $30 billion transactions
e-Buy is about buying smarter and processing more efficiently
http://www.pcmag.com/article2/0,4149,33527,00.asp
e-Business Value
Customer Value
GE Value
Buy smarter
Process more efficiently
Sell more
Buy smarter
Process more efficiently
Sell more
Competitive Advantage through diferentiation (value added
customer services) and cost reduction
e@GE
e-Business strategy
continues to build on the
business model that has
enabled the company to
outpace S&P 500 earnings
growth through every
cycle
http://www.ge.com
e@GE
Digitization mandate - Straight from the top
IT – leveraged to cut costs and differentiate
Differentiation
• Online tools and services
• Increased front office operations
“Digitization is changing our relationship with our customer. At the
customer for the customer (ACFC)-the way that we differentiate.”
http://www.ge.com
IT as a Competitive Weapon Sustainability
Sustainable Advantage
Do our case studies have sustainable advantage
?
Supply
Project Lifecycle Analysis
Competitor
Analysis
Sabre
GE (Plastics, Appliances)
Lead Time
Competitive
Asymmetry
“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives
System
Analysis
Pre-emption
Potential
Web Business
Staying Power
•
•
•
•
•
•
Simplicity
Applying traditional business thinking to a new channel
Use web to improve business and create valuable services
Awareness of customer needs
e-Business is a constantly moving target
Need for sound relationships
http://www.cio.com/archive/120101/power_content.html
Davidson, Stephen, “B2B Exchaanges:Lessons from the Trading Pit,” Journal of Internet Law, 4/2002, v5 i10 p1(10)
IT as a Competitive Weapon Summary
IT can be used as a competitive weapon through cost
reduction and differentiation
Very few companies sustain competitive advantage using
IT
IT projects need to be evaluated for “sustainability’
in addition to traditional risk
e-Business is a constantly moving target
Future of IT
Competitive Advantage?
or
Competitive Necessity?
