Methods
Content
Sample Methods
Leverage metrics to:
1. Combine the seemingly incompatible 2. Benchmark what exemplar organizations are doing
3. Kill sacred cows
4. Ensure rigor 5. Step out of your time box; think holistically 6. Take your strategy to extremes
7. Communicate market your ideas
8. Manage change
PRESENTATION ON METHOD
SELECT A METHOD/METRIC (CLASS NOTES) NOT PREVIOUSLY COVERED
PRESENTATION SHOULD BE APPROXIMATELY 15 MINUTES, WITH 3 CHARTS: 1. THE METRIC 2. APPLY TO AIR PRODUCTS 3. APPLY TO KODAK YOU ARE THE INSTRUCTOR; PROVIDE LECTURE NOTES FOCUS ON: WHY THE ORGANIZATION FALLS INTO A CATEGORY IN THE METRIC IMPLICATIONS (“SO WHAT”) HOW CAN THE ORGANIZATION DO BETTER DO NOT SPEND TOO MUCH TIME ON DEFINITIONS; APPLY THE MODEL;
REVIEW YOUR SELECTION WITH ME EARLY; A PARTICULAR METHOD WILL BE COVERED ONLY ONCE (FIRST COME FIRST SERVED) ALL CASES AND RESEARCH PROJECT SHOULD APPLY APPLICABLE METHODS PRESENTED BY CLASS
Who’s Under The Microscope
Aberdeen Group 450 mid market companies
AMR Research 400 companies of various sizes annually Forrester Research 1,000 IT decision makers
semiannually
Gartner Varying number of companies annually plus regular
conference polls
Meta Group 400 large global companies annually, with spot
surveys of 5,000 IT managers throughout the year
Morgan Stanley 300 large companies monthly
Professor Luftman will cover, so do not select for presentation.
ANSOFF’S PRODUCT / MARKET EXPANSION GRID
( The Original Product / Market Matrix ) Current Products 1 New Products 3 Product development strategy 4 Diversification strategy
Market penetration strategy
2
Market development strategy
Ref: The Conference Board, Books
THE FIVE COMPETITIVE FORCES THAT DETERMINE INDUSTRY PROFITABILITY
POTENTIAL ENTRANTS
THREAT OF NEW ENTRANTS
BARGAINING POWER OF SUPPLIERS
INDUSTRY COMPETITORS
BARGAINING POWER OF BUYERS
SUPPLIERS
RIVALRY AMONG EXISTING FIRMS THREAT OF SUBSTITUTE PRODUCTS OF SERVICES
BUYERS
SUBSTITUTES
Porter
THE FIVE COMPETITIVE FORCES THAT DETERMINE INDUSTRY PROFITABILITY
Political & Legal Environment Complementors
POTENTIAL ENTRANTS
THREAT OF NEW ENTRANTS BARGAINING POWER OF SUPPLIERS INDUSTRY COMPETITORS BARGAINING POWER OF BUYERS
Technical Environment
SUPPLIERS
RIVALRY AMONG EXISTING FIRMS THREAT OF SUBSTITUTE PRODUCTS OF SERVICES
BUYERS
SUBSTITUTES
Demographic Environment
Social Environment
Macroeconomic Environment
COMMUNICATIONS
•Understanding of Business by IT •Understanding of IT by Business •Inter/Intra - organizational Learning/Education •Protocol Rigidity •Knowledge Sharing •Liaison( s) effectiveness
COMPETENCY/VALUE MEASUREMENTS
•IT Metrics •Business Metrics •Balanced Metrics •Service Level Agreements •Benchmarking •Formal Assessments/Reviews •Continuous Improvement
GOVERNANCE
•Business Strategic Planning •IT Strategic Planning • Organization Structure Reporting/ •Budgetary Control •IT Investment Management •Steering Committee(s) •Prioritization Process
·
IT BUSINESS ALIGNMENT MATURITY CRITERIA
SKILLS
•Innovation, Entrepreneurship •Cultural Locus of Power •Management Style •Change Readiness •Career cro ssover training •Social, Political, Education, Cross - Trusting Interpersonal Environment •Hiring and retaining
PARTNERSHIP
· · · · · · •Business Perception of IT Value •Role of IT in Strategic c Business Planning •Shared Goals, Risk, Rewards/Penalties •IT Program Management •Relationship/Trust Style •Business Sponsor/Champion
SCOPE & ARCHITECTURE
•Traditional, Enabler/Driver, External •Standards Articulation •Architectural Integration: - - Functional Organization -Enterprise -Inter - Inter - enterprise •Architectural Transparency, Agility, Flexibility •Manage Emerging Tech.
Strategic Alignment Maturity Summary
Level 3
Level 5
•Optimized process •COMMUNICATIONS: Informal, pervasive •COMPETENCY/VALUE: Extended to external partners •GOVERNANCE: Integrated across the org & partners •PARTNERSHIP: IT-business co-adaptive/improvisational •SCOPE & ARCHITECTURE: Evolve with partners •SKILLS: Education/careers/rewards across the organization
Level 4
•Improved/ managed process
•COMMUNICATIONS: Bonding, unified •COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed •GOVERNANCE: Managed across the organization •PARTNERSHIP: IT enables/drives business strategy •SCOPE & ARCHITECTURE: Integrated with partners •SKILLS: Shared risk & rewards •Established focused process
•COMMUNICATIONS: Good understanding; Emerging relaxed •COMPETENCY/VALUE: Some cost effectiveness; Dashboard established •GOVERNANCE: Relevant process across the organization •PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative •SCOPE & ARCHITECTURE: Integrated across the organization •SKILLS: Emerging value service provider;Balanced tech & business hiring Level 2 •Committed process
Level 1
•COMMUNICATIONS: Limited business/IT understanding •COMPETENCY/VALUE: Functional cost efficiency •GOVERNANCE: Tactical at Functional level,occasional responsive •PARTNERSHIP: IT emerging as an asset; Process enabler •SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS) •SKILLS: Differs across functional organizations
•Initial/Ad-Hoc process •COMMUNICATIONS: Business/IT lack understanding •COMPETENCY/VALUE: Some technical measurements •GOVERNANCE: No formal process,cost center, reactive priorities •PARTNERSHIP: Conflict; IT a cost of doing business •SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) •SKILLS: IT takes risk, little reward; Technical training
Framework For Assessment Strategic Importance of an IT System
HIGH FACTORY DEPENDENCE UPON EXISTING SYSTEMS SUPPORT LOW LOW IMPACT OF SYSTEM HIGH TURNAROUND STRATEGIC
Source: F.Warren McFarlan and James Cash
Classification of Global Strategies
High
Global Integration
Multinational Strategy
Transnational or Metanational Strategy
Global Exporter Strategy Low Low
Multi Local Strategy High
Local/National Responsiveness
Software Engineering Process Technologies Adoption Grid
High
Niche technology Ease of individual organizatio n adoption Experimental Slow mover
Dominant standard
Low
Low
C.Kemerer, CISR, 6/92
Ease of community adoption (standards perspective)
High
Budgeting System for Controlling Functions
Outputs
Inputs
Outputs minus Inputs
REVENUE CENTERS
EXPENSE CENTERS
PROFIT CENTERS
INVESTMENT CENTERS
Outputs Compared with Assets
Aligning Measurements to Strategy
What is my vision of the future?
Statement of Vision 1.Definition of SBU 2.Mission of Statement 3.Vision Statement
To my stake holders
To my customers
If my vision succeeds How will I differ?
With my Internal Management Processes Internal Perspective
With my ability to innovate and grow
Financial Perspective
Customer Perspective
Innovation and learning
What are the critical Success Factors?
What are the Critical Measurements?
The Balanced scorecard
Kaplan & Norton
Total Value Management Framework
IT Enabler:
Business Process:
Business Outcome:
Portfolio Management Options
Organization Change Process
Source: Belasco, “Teaching the Elephant to Dance”, Crown Publisher NY.
THE GENERIC VALUE CHAIN
FIRM INFRASTRUCTURE
SUPPORT ACTIVITIES
HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT
SERVICE
INBOUND OPERATIONS OUTBOUND MARKETING LOGISTICS LOGISTICS & SALES
PRIMARY ACTIVITIES
Porter
STRATEGY FORMULATION
VISION (WHERE)
(BHAGS)
ANALYSIS
STRATEGY (HOW)
PROJECT IMPLEMENTATION
MEASUREMENTS MISSION (WHAT)
t
LUFTMAN
The BCG Matrix
Market Share High Low Question Marks
Anticipated Growth Rate
Stars
High
Cash Cows
Low
Dogs
MISSION STATEMENTS
Who are we? What do we intend to be? What do we stand for? What do we do for the world? What makes us attractive to each important stakeholder? Why should they support us? What is our long-term unalterable focus, intended area of preeminence? What makes us exciting? What makes this enterprise different? What is it best at? How does it provide unique value to customers and community? How will we provide challenge to our people? How will we extend and grow? What are our key technologies? Intellectual skills? Concepts of customer service? How will we define success? How will we measure it?
An organizations mission is its purpose, or reason for existence.
Mission
A Mission statement for information systems is a concise statement of what business the group is in. It is a statement of why the Information Systems group exists, what purpose and function it provides for the company. You can also look at the company mission for ideas or themes for the information systems mission. Following are examples of information systems mission statements developed at different companies. An organizations mission is its purpose, or reason for existence.
IT Mission Example -1 of 5
The mission of Information Systems, in partnership with the business units, is to facilitate the availability of timely and accurate information needed to manage the day-to-day and strategic direction of the company by the deployment of systems and tools. This information will assist the company in achieving its objectives and becoming one of the top-ten in the marketplace.
IT Mission Example -2 of 5
The mission of Information Systems in partnership with the business community is to develop, implement, and maintain worldwide business system solutions that provide secure collection, storage, and access to information. We will accomplish this by matching the business requirements with the appropriate technology.
Mission Example - 3 of 5
The mission of Information Systems is to develop, implement, and maintain high-quality efficient and effective business systems that provide the information needed to support the daily operation and strategic business direction of the business at a level superior to the competition with customer satisfaction as the end goal.
Mission Example - 4 of 5
Our mission is to facilitate improvements in operating efficiency and effectiveness by delivering worldwide integrated business systems and services. The business strategies will drive our efforts to ensure that our contributions provide the highest value to the corporation.
Mission Example - 5 of 5
The mission of the Information Systems organization is to provide timely, cost-effective, high-quality information systems and services that meet or exceed our customer’s requirements for achieving business goals and objectives.
Vision
A Vision is a concise measurable statement of where you want to go, what you aspire to be. Develop this by looking at the company’s vision statement and objectives and identifying how Information Systems can assist the company.
Characteristics of an Effective Vision
Imaginable : Conveys a picture if what the future will look like
Desirable : Appears to the long-term interests of employees, customers, stockholders, and others who have a stake in the enterprise Feasible : Comprises realistic, attainable goals Focused : Is clear enough to provide guidance in decision making Flexible : Is general enough to allow individual initiative and alternative responses in light of changing conditions Communicable : Is easy to communicate; can be successfully explained within five minutes
Elements of an Effective Strategic Vision
A good strategic vision should include:
• A statement of what the organization wants to be and how it will get there • Concentrate goals and milestones (financial and otherwise) • Core capabilities that need to be developed • A description of how to change the organization • A proposed market and product scope supporting the vision • Robustness in the face of multiple scenarios • Stretch to reach beyond the organization’s current grasp • Passion, in order to galvanize the organization • Simplicity and clarity of purpose
Ref. Profiting from Uncertainty - Paul J. H. Schoemaker
Vision Example - 1 of 5
Vision:
• Anyone can get any information (site, geographic area or global level) at any time, any where, any way, given the proper security constraints. • The end-user does not have to know the location of the data. • Maintain data in only one master place within the organization. • Implement systems to enhance end-user productivity. • Systems are able to support competitive business demands with immediate response to quickly changing business needs. • Information Systems adds a competitive edge to the company’s product line.
Vision Example - 2 of 5
Vision : We seek to be an integral partner in the achievement of the company’s vision and mission through the appropriate application of Information Technology to business needs.
Vision Example - 3 of 5
We will have Business Systems that: Take advantage of global “sameness” • Are purchased whenever practical • Have integrated data that is entered only once • Provide consistent definitions of information • Support functional and cross-functional business processes • Deliver the right information, at the right place, at the right time, in the right format • Are flexible enough to support changing environments • Can be accessed by office, home, and mobile workers • Provide capabilities to external customers and suppliers
Vision Example - 4 of 5
The strategic role of Information Systems is to be:
• A provider of information technology, which means assessment and acquisition of new technology which will assure that company use of information systems and applications provide strategic advantage in our business markets. • A provider of information services, the infrastructure, and environment that assures company-wide information sharing that meets customer requirements. • A strategic business partner of the business units to provide timely and cost-effective information systems solutions to business needs • A proactive agent of change, providing management and staff with decision making, quality information through automated and integrated information systems and processes.
Vision Example - 5 of 5
Vision of Information Systems : • Have delighted customers (users) • Proactively address business needs • Provide competitive advantage to the company • Be recognized in the industry as a world-class Information Systems organization. • Have Information Systems employees with a passion and commitment, people that carry the fire and love their job • Provide enterprise-wide business solutions. • Have a superior functioning team. • Simplify standardize,automate, and integrate.
Strategic Objectives
Strategic objectives state how you are going to achieve the vision and mission. Following are examples of objectives from different companies.
Strategic Objectives Example - 1 of 6
Information Systems Objectives :
Implement solutions in partnership with the business units. Champion each project ( business-requested project, not infrastructure projects) by business management to ensure that business issues drive technical solutions.
Contd...
Align Information Systems projects and priorities with business priorities and direction. Likewise, the strategic direction of the company will determine the strategic direction of Information Systems. Provide responsiveness and flexibility to address changing business requirements rather than simply utilizing technology. Meet External customer requirements and assist in solving our customers’ business issues. Maximize productivity and reduce costs throughout the business Provide Real information for business decisions (as opposed to endless amounts of data). Information must be available anytime(24 hour access), anywhere in the world, in any way (flexible formats), for any one (with security). Support worldwide information requirements and business objectives.
Contd...
Minimize Information Systems investments through the use of standardized hardware and packaged software, whenever possible. This will minimize support requirements and provide for maximum growth and flexibility to take advantage of the future industry developments. Minimize risk to the company by utilization of proven, yet not out-of-date, technology. Educate the users and maximize their ability , through tools and training, to get information without dependence on Information Systems and utilize new capabilities and leading technology in providing a competitive advantage for the business Balance Information Systems resources and expenditures with the business demands and the return on investment ( ROI ) to the business
Information Systems Strategies 2 of 6
• Drive growth by enabling superior consumer insight, streamlining revenue producing activities, providing value added customer services and increasing collective innovation • Accelerate productivity by eliminating people, paper and time from business processes and providing people with unique insights into their activities and decision processes • Enable organizational excellence by providing people with instantaneous, relevant, integrated information and knowledge any time and any place in the world • Provide an information technology infrastructure which is reliable, secure and responsive at top 10% cost efficiency levels
• Develop an integrated, information systems plan to support global food business and deploy solutions which enable global business processes
Strategic Objectives Example - 3 of 6
Information Systems Objectives: Information Systems will provide support, guidance, and advice to all areas of the business. The assistance will include the application and use of technology, in addition to suggestions on business process improvements. Provide continued support after the project implementation to ensure you meet the business needs. Design Systems for ease of use to maximize the business productivity. We will provide superior communication to ensure information sharing throughout the organization regarding technology and computing. We will understand the business and communicate in a language that is understandable. All areas of business will know who to call for assistance. We will treat our technology users like customers and serve them with a positive attitude.
Contd...
Strategic Objectives Example - 4 of 6
Information Systems Objectives:
• Implement high-quality business solutions with a focus on customer satisfaction. • Develop systems that support the growth and profitability goals of the company. • Assist the company in improving its strategic position in the marketplace. • Support the business by improving efficiency, productivity, information flow, and information access. • Provide tools which will allow employees to make better and more timely business decisions. • Reduce overhead Costs.
Strategic Objectives Example - 5 of 6
Information Systems Objectives:
• Support corporate objectives and goals by providing information management technologies, systems, and services that meet business requirements. • Communicate and execute the Information Systems Organization vision and strategic plan. • Effectively and efficiently provide and manage the companywide information systems infrastructure. • Team and collaborate with the business units to fulfill their information sharing needs.
Strategic Objectives Example - 6 of 6
We will strive for the following Long-term objectives in all systems:
Flexibility Performance Availability Managed Cost Managed Risk Viability Manageability Support-ability Scale-ability Interoperability Reduced Complexity Single System Image Extensibility
DECISION PROCESS FLOW
How do I __________? The issue is important because__________.
What have I done to date? What do I want the group to do?
Clarifying questions Issue restatement How do I __________?
Suggestions
Specific next steps, due date, risks
1
Obtain Sponsor/ Champion Gap Analysis
Strategic Alignment Maturity
7 3a
Implementation Plan “To-Be” “To-Be” State of State of The The Organization Organization Periodic Review
3 5
8
2
Form The Team “As-Is” “As-Is” State of State of The The Organization Organization
Strategy Alternatives Analysis
Measurement Criteria
4
SWOT Analysis
5
Porter Industry Profitability Analysis
6
Ansoff ProductMarket Analysis Strategy Alternatives
Environmental Environmental Turbulence Turbulence
The Strategy Management Process
3.
Assess the organization
1.
Define the organization’s mission
2.
Establish objectives
5.
Identify opportunities and threats
6.
Develop and evaluate alternative strategies
7.
Select Strategy
8.
Implement strategy
Assess the environment
4.
Integrated TAM/TTF model.
Attitude Towards Use Intention to use Tool Actual Tool Use
Perceived Ease of Use
Perceived Usefulness
TAM - Technology Acceptance Model
Reference: Davis & MISQ 1989
Tool Experience
Task Technology Fit
TTF - Task Technology Fit
Reference: D. Goushned, R. Thompson, MISQ, 1995
Tool Functionality
Task Characteristics
Methods for class
presentation begin here!
Always
Consider
Benchmarking Process Steps
1. Identify What is to be Benchmarked
Planning
2. Identify Comparative Companies 3. Determine Data Collection Method and Collect Data 4. Determine current Performance “Gap”
Analysis
5. Project Future Performance Levels
Integration
6. Communicate Benchmark Findings and Gain Acceptance
7. Establish Functional Goals 8. Develop Action Plans
Action
9. Implement Specific Actions and Monitor Progress 10. Recalibrate Benchmarks
Maturity
11. Leadership Position Attained & Practices Fully Integrated into Process
Source:Robert C. Camp books & www.apqc.org
Continuous Benchmarking Method
Deliver
Define
Finance
Business Improvement Process
Measure
Contract Invest
Prioritize & Strategize
Investment Evaluation Methodologies
Source: Dataquest/Gartner
BENCHMARKING / KIVIAT 1 OF 2
XYZ Software Process Assessment • 64 XYZ projects compared to SPR “Top 10” (Data provided by Capers Jones)
Physical Env. Metrics
3 2.5 2 1.5 1 0.5 0
Customer Focus Project Mang
• Scale: 1-2 = Leading Edge 3 = Industry Norm Methodologies 4-5 = High Risk
64 XYZ Projects
Project Team Variables
Tools
Quality Focus
SPR "Top 10"
BENCHMARKING / KIVIAT 2 OF 2
Leadership
4.1
Traditional Retailer • Brick and mortar focus • Annual revenue of + $500 M
2.6
3.1
Technology
3.7
• Understand the importance of eBusiness, but have yet to
4.1 2.6
Governance/ Operating Model
develop a plan of attack Best of Breed
• Companies incorporating
3.0 4.0
eBusiness best practices
Organizational Competencies
Ref : Cisco Systems
STRATEGY, VISION MISSION
Generic Competitive Strategies (1 of 2)
Low Cost Make product available at lower cost than competition Make product different from competitors Make product for specific market management Make product that is totally new Join competitors or others to offer something profitable
Differentiation
Niche Marketing
New Business
Alliance
Porter, Treacy, Oster
Major Options in Securing Generic Competitive Strategies (2of 2)
Suppliers Differentiation Customers Competitors New Entrants Substitutes
Low Cost
Niche New Business
Alliances
Porter, Treacy
Strategic Process Theme Diagram
STRATEGY
Strategy Formulating Strategy Strategy
ORGANIZATION
Strategy formation
Structure and Systems Culture and Power
The Entrepreneurial Concept The Mature Context The Diversified Context The Innovative Context The International Context The Context of Change
Source: Henry Mintzberg, James Brian Quinn & Sumatra Ghoshal
CONCEPTS
CONTEXTS
Dynamics of the self- aligning organization
•Create a shared strategic vision for the organization •Develop a deployment plan to translate the strategic plan into action •Identify critical success factors •Identify key strategic work processes •Align all organizational work with strategic vision •Design an ongoing process for systematic review •Measure and monitor results •Identify critical “strategic” customers •Identify customer delight factors •Create the organizational capability and infrastructure to continuously gather “actionable” customer data and use it to drive process improvement and design •Measure and monitor results
Strategy
•Identify core processes •Redesign key processes •Continuously improve processes •Measure and monitor results
•Align culture with strategic vision •Communicate strategy
Process
Culture Leadership
•Train for leadership in rapidly changing environment •Measure and monitor results
Customer
•Identify corporate and individual competencies necessary to achieve the strategic vision •Identify current competency levels •Design and employ plans to “close gaps”
Source: Labovitz, Rosansky 1997
People
•Design and align reward and recognition systems with organizational goals and desired competencies •Measure and monitor results
Type of Competitive Advantage Being Pursued
Lower Cost Differentiation
A Broad Cross-Section of Buyers
Overall Low Cost Leadership Strategy
Broad Differentiation Strategy Best-Cost Provider Strategy Focused Differentiation Strategy
A Narrow Buyer Segment
Focused Low-Cost Strategy
Source: Strickland & Thompson, Strategic Management 11th Edition, 1999, pp. 136
Strategic Orientation Modes
Follow
Interact
Isolate
Shape
Low
High
Innovation Orientation
Ref : Pierre Berthon, James M Hulbert, Leyland F.Pitt, California Management Review Vol 42 , No. 1 Fall 99
How to Respond to Disruptive Strategic Innovation
H
• Focus on your own business or • Ignore the innovation (its is not your business)
• Adopt and separate or • Adopt and keep internal or • Attack back and disrupt the disruption
Ability to Respond
• Focus on your own business
• Attack back and disrupt the disruption or
• Embrace the innovation and scale it up
L
H
Motivation to Respond
Ref: “Shifting Cultural Gears in Technology – Driven Industries” by Paul J.Kampas; MIT Sloan Management Review, Winter 2003 Vol.44.No.2
Three Approaches to Strategy
Build and Depend
Strategic logic Strategic steps Establish position Identify an attractive market Locate a defensible position Fortify and defend
(1 of 2)
Nurture and Leverage Unique
Leverage resources Establish a vision Build resources Leverage across markets
Flexibly pursue via Simple Rule
Pursue opportunities Jump into the confusion Keep moving Seize opportunities Finish strong How should we proceed? Key processes and unique simple rules Rapidly changing, ambiguous markets Unpredictable Managers will be too tentative in executing on promising opportunities Growth
Strategic question
Source of advantage
Where should we be?
Unique, valuable position with tightly integrated activity system Slowly changing, wellstructured markets Sustained It will be too difficult to alter position as conditions change Profitability
What should we be?
Unique, valuable, inimitable resources Moderately changing, well-structured markets Sustained Company will be too slow to build new resources as conditions change Long-term dominance
Works best in Duration of advantage Risk
Performance goal
Ref: Eisenhardt & Sull,HBR
Simple Rules (2 of 2)
Type How To rules Boundary rules Priority rules Timing rules Exit rules
Ref: Eisenhaldt & Sull,HBR
Purpose
They spell out key features of how a process is executed: “What makes our process unique?”
They focus managers on which opportunities can be pursued and which are outside the pale They help managers rank the accepted opportunities They synchronize managers with the pace of emerging opportunities and other parts of the company They help managers decide when to pull out of yesterday’s opportunities
BUSINESS PLANNING MODEL
Characteristics Motive for decisions Goals of organization Evaluation of proposals Choices made by Decision horizon Preferred environment Decision links Flexibility of mode Size of moves Vision of direction Condition for Use Source of power Objectives of organization Organizational environment Status of organization Entrepreneurial Mode Proactive Growth Judgmental Entrepreneur Long term Uncertainty Loosely coupled Flexible Bold decisions General Adaptive Mode Reactive Indeterminate Judgmental Bargaining Short term Certainty Disjointed Adaptive Incremental steps None Planning Mode Proactive and reactive Efficiency and growth Analytical Management Long term Risk Integrated Constrained Global strategies Specific
Entrepreneur Operational Yielding Young,small, or strong leadership
Divided Non-operational Complex, dynamic Established
Management Operational Predictable, stable Large
Implied planning styles
Top-down
Bottom-up
Top-down/bottom-up
Adapted from Mintzberg (1973, p. 49) California Management Review, vol.16, no.2.
External Business Strategy Model
Strategic Typology Focus Environment Entrepreneurial problem Product/market Today Stable Niche positioning Narrow segment Defender Prospector Tomorrow Dynamic Innovation New product and markets Flexibility Multiple/prototype Decentralized Analyzer Today and tomorrow Balanced Dual focus Market penetration, product and market development Flexibility and stability Dual Distributed/linked Reactor Yesterday Unstable Survival Inconsistent
Engineering problem Technology
Efficient production/ distribution of services Single core Centralized
Cost minimization Mixed Ad hoc
Administrative problem Emphasis Orientation for top management Planning
Implied planning styles
Strict control
Mechanistic Production and control
Facilitate
Organic Marketing and R&D
Differentiate structure and process Matrix organization Key functional areas and product lines Intensive planning
Weak links
None Semiautonomous groups Loose
Formal/hierarchical
Bottom-up
Low formalization
Inside-out
Top-down / Bottom-up
None
Ref: Compiled from material in Miles and Snow (1978)
FOUR APPROACHES TO INNOVATION
INNOVATION STRATEGY Recruiting and Retaining Superior Human Capital UPSIDES • Better control of IP • Long-term growth focus • Difficult for competitors to imitate • Internationalization of skills and capabilities • Full capture of returns DOWNSIDES • Organic growth is slower • Challenge of identifying and valuing superior human capital • Full risk exposure • Long time horizon • Uncertain returns SOME EXEMPLAR COMPANIES • Goldman Sachs • Google • Merck • Research In Motion • Southwest Airlines • W.L. Gore • Apple • BMW • Hewlett-Packard REQUIREMENTS • Astute strategic human resource management • Organizational flexibility
Internal R&D Spending
• Culture of risk tolerance • Organizational flexibility • Long-term commitment
Strategic Alliances
• Shared risk • Multiple, smallscale investments provide strategic options • Faster than internal development
• Faster than growing organically • Acquire innovative technologies become competitors
• Potential loss of IP controls • Challenge of alignment of goals • Shared returns
• IBM • Eli Lilly • Oracle • Procter & Gamble
• Dedicated function for the management of partnerships
Acquisitions
• Risk of overpaying • Cultural integration concerns • Involves relying on others for innovation
• Cisco • General Electric • Pfizer • Microsoft
• Capability to identify and assimilate acquisition targets
SOURCE – Rothaermel & Hess, MIT SLOAN MANAGEMENT REVIEW, Spring 2010.
Top - Down Planning with Bottom - up Implementation (BSP)
Business Mission
Business Objectives Business Functions Top - down Planning Business Processes Bottom - up Implementation Computer Applications Computer Databases
Business Data
Information Systems Architecture
FIVE ARCHITECTURAL VIEWS
Business View
Work View
Application View
Information View
Technology View
Source : “Paradigm Shift” by Tapscott & Caston
Dick Nolan: Six stages of data processing growth
Growth process
Applications Portfolio Functional cost reduction application Specializatio n for technological learning Lax “Hands off” Proliferation Upgrade documentation and restructuring of existing applications Middle management Retrofitting existing applications using data base technology Establish computer utility and user account teams Tailored planning and control systems Accountability learning Organization integration of applications
1 OF 2
Application integration “mirroring” information flows Data resource Management
DP organization
User oriented Programmers
Data administration
DP planning and control User awareness
More lax
Superficially enthusiastic
Formalized planning and control Arbitrarily held accountable
Shared data and common systems Effectively accountable
Level of DP expenditures
Stage I Initiation
Stage II Contagion
Stage III Control Transition
point
Stage IV Integration
Stage V Data administration
Data resource strategic planning Acceptance of joint user and data processing accountability Stage VI Maturity
The Stages Theory of Computer Growth 2 OF 2
Technological Discontinuity
Network Era Micro Era DP Era
Stage I Initiation
Stage II Contagion Stage III Control Stage VI Integration and Stage I of Micro Era Stage II Contagion Stage III Control Stage VI Integration and Stage I of Network Era Stage II Contagion Stage III Control Stage VI Integration
1960
Ref: Richard Nolan
1975
1980
1995
2010
IT STRATEGIC ALIGNMENT BASED ON STROBE-STROIS
High
Business strategy led
Organization led
STROBE
Strategic Orientation of Business Enterprise
Conservative
Low
Technology led
STROIS
Chan& Huff; Venkatraman
High
Strategic Orientation of IS
determinant for intention/usage
Unified Theory of Acceptance and Use of Technology (UTAUT-model)
moderator of key relationship
REF: MISQ: So Venkatesh (et al) constructed in 2003
Pyramid Power
Evolving IS organizations rise through ever-more valuable skill sets
LEVEL 3
These organizations have a great deal of credibility at the senior business-leader level. They have a passion for enabling business through IT. Level 3 Create Value LEVEL 2 Infrastructure has stabilized. These organizations initiate new processes and implement measurement and quality programs. They’re very good at delivery. There’s commitment to change and improvement.
Level 2 Build Competence, Capability & Credibility LEVEL 1
These organizations take what they’ve got and work to optimize it. There is a strong emphasis on infrastructure.
Level 1 Deliver the Basics
SOURCE: “ATTAINING TOP-LEVEL IS PERFORMANCE,” OMEGA POINT CONSULTING AND ICEX INC. Mary Silva Doctor, Richard Swanborg Jr.
Who receives, uses and benefits from the products and services this work system produces ?
WORK
SYSTEM
What aspects of the surrounding context have important effects on the work system’s operation and success ?
CUSTOMERS
What products and services does this work system produce ?
PRODUCTS & SERVICES What are the major steps in the business process ?
BUSINESS PROCESS
PARTICIPANTS
INFORMATION
TECHNOLOGY
INFRASTRUCTURE
How does the system advance the firm’s strategy ?
Ref: Steve Alter
Who performs the steps in the business process ?
What information is produced or used by the work system ?
What dedicated technology is used to perform the steps in the business process ?
What human, informational and technical infrastructure that is shared by other work systems is used by in this work system’s operation ?
The Seven Layers of a Knowledge Environment
Layer 7: Layer 6: Co-Creating value Creating next practices Facilitating discovery Incorporating diverse insights
Layer 5:
Layer 4: Layer 3: Layer 2: Layer 1:
Mobilizing action teams Creating new initiatives
Leveraging sources of competence Ease of access, visibility, and dialogue Using information Extracting contextual knowledge Information sharing Knowing best practices within the firm Training and development Building the skill base
REF: The Future of Competition – Co-Creating Unique Value with Customers, by C.K. Prahalad, Venkat Ramaswamy
IT/Geographic Scope Matrix (IGSM)
High GLOBAL LOW TECH
Highest costs, product/customer mismatch and poor margins
GLOBAL HIGH TECH High cost, high revenue Potentially high margins
LOCAL LOW TECH Low cost, low revenue Potentially good margins
Low
LOCAL HIGH TECH High costs and weak margins IT Scope
Lower performance region
Low
Higher performance region
K. Peffers, V.K.Tuunainen
High
Building an Infomediary Business
Stage 1 Building initial profiles Stage 2 Establishing standards to enrich profiles Stage 3 Leveraging profiles to extract profiles
OBJECTIVE
Build initial profiles Acquire critical mass of customers
Deepen profiles Engage vendors Establish standards
Use profiles to create value for infomediary, customers, and vendors
Ongoing agent services Ongoing message filtering service Second-wave target marketing services Purchase ID services Market research services Add impulse products Small ticket Infrequent purchases General passion Touch/smell dimension
PRIMARY SERVICE FOCUS
Basic agent services Enhanced agent services Message filtering service Enhanced message filtering services First-wave target marketing services
Net Worth by John Hagel III & Marc Singer
PRIMARY PRODUCT FOCUS
Search products specially for trigger products Large ticket Complex products Targeted passion
Add replenishment products Small ticket Frequent purchases “Specificability” Toiletries, Stationery Household supplies, Basic foods
High
Winner at risk
Self-aware winner
Self-aware winner
Understands information orientation and uses it
Winner at risk
Delivers good results, but perhaps not for long
Info-oriented laggard
Understands information orientation, but suffers fundamental weaknesses
Blind and confused
Major business change required
Low
Blind and confused
Low
Info-oriented laggard
High
Information Orientation
Ref: Marchand, Kettinger, Rollins
THE ANALYSIS FRAMEWORK
Firm Infrastructure • Web-based, distributed financial and ERP systems • On-line investor relations (e.g., information dissemination, broadcast conference calls)
Human Resource Management
• Self-service personnel and benefits administration
• Web-based training • Internet-based sharing and dissemination of company information electronic time and expense reporting Technology Development • Collaborative product design across locations and among multiple value-system participants • Knowledge directories accessible from all parts of the organization • Real-time access by R&D to on-line sales and service information Procurement • Internet-enabled demand planning; real-time available-to-promise/capable-to-promise and fulfillment • Other linkage of purchase, inventory, and forecasting systems with suppliers • Automated “requisition to pay” • Direct and indirect procurement via marketplaces, exchanges, auctions, and buyer-seller matching Inbound Logistics Operations Outbound Logistics Marketing and sales • On-line sales channels including • Real-time • Integrated • Real-time transaction of orders web sites and marketplaces integrated Information whether initiated by an end scheduling, exchange, consumer, a sales person, of a • Real-time and outside access to shipping, scheduling, and channel partner customer information, production warehouse decision making in logs, dynamic pricing, inventory • Automated customer-specific management and in-house plants, availability, on-line submission of agreements and contract terms planning, and contract assemblers quotes, and order entry advanced planning and components • Customer and channel access to and scheduling suppliers product development and delivery • On-line product configurations across the company status • Customer-tailored marketing via • Real-time and its suppliers customer profile available-to-promise • Collaborative integration with • Dissemination throughout the company of realtime inbound and inprogress inventory data • Integrated channel management including information exchange, warranty claims, and contract management (versioning, process control) Web-distributed supply chain management and capable-topromise information available in the sales force and channels customer forecasting systems • Push advertising • Tailored on-line access After sales service • On-line support of customer service representatives through e-mail response management, billing integration, co-browse, chat, “call me now”, voice-overIP, and other uses of video streaming • Customer self service via web sites and intelligent service request processing including updates to billing and shipping profiles • Real-time field service access to customer account review, schematic review, parts availability and ordering, workorder update, and service parts management
• Real-time customer feedback through Web server opt in/opt out marketing and promotion response tracking
Online Training
Knowledge Management
Learning Architecture
Infrastructure
Learning Culture, Management Ownership, and Change Management
Sound Business Case
Reinventing the Training Organization
Ref: Marc J.Rosenberg; e - Learning
Knowledge Strategies
Aggressive
Conservative
Exploiter
Explorer
Innovative
Ref: Zak, The Strategic Management of Intellectual Capital and Organizational Knowledge
Framework for Strategic Web Sites
Level 4 Business Transformation Level 3 Business Integration
Level 2 Prospecting
Level 1 Basic Presence ADD’L FEATURES Extensive information Search engine Basic interactivity
ADD’L FEATURES E-Commerce -Transactions -Communities
Customer self-service Basic customization
ADD’L FEATURES Supplier integration Customer integration
Personalization Multi-channel integration Advanced customization & configuration
FEATURES Company information
Brochures
Cost $5k-$500k
Cost Cost $500k-$5M $5M-$50M+ Increasing Cost
Cost $50M-$150M+
What e-Functions Are they Doing?
Ref: Gartner Group, Transition Partners
E Business/IT Alignment Model
Strategic Misalignment • E-Vision Without IT Delivery • Dependence on ESPs • Lack of Engineered Customer Services/Fulfillment • Dead-End Business Opportunity Business • Needs Integration With IT Commitment to Implementation Pure Web or “Clicks and Bricks” Hybrid Model • Common Business and IT Planning/Strategy • Optimized E-Business Model • Maximized Learning
E-Business Model
Toe in the Water • Discovery Phase • Minimal E-Commitment • Localized Investment • Drive With Joint Business/IT Strategy
IS Leads (But Who Follows?) • High IT E-Investment • Solution-Seeking Problem • High-Risk Positioning • Needs Integration With Business Strategy
Internal Development of E-Business Extra/Infrastructure
Source: Gartner Group
E-Business Strategizing
Opportunities
Firm Strategic Intent
E-Business Strategizing
Firm Core Competencies
Portfolio of E-Business Initiatives
E-Business Building Blocks
Threats
Ref: Place to Space: Peter Weill & Michael R. Vitale
Channels to the Customer
Strengths IVR Cheap, universal access effective for repetitive transactions Ease of use and equal access Comfortable Personal and simple: can be good for unsctructured and illinformed questions Wide coverage Information Provision Rich for predetermined queries Rich for predetermined queries Rich Variable---depends on operator or purpose Rich but may have Digitized profiling but may be competitor or "screened" by independent ratings intermediary Rich and Digitized profiling semistructured Highly variable Often lost Information Capture Digitized but limited Digitized but limited Often lost Often lost
Kiosk/ATM
Physical Mail Phone/Call Center
Customer database
Manual Data Entry
Electronic
Intermediary Internet/Email
Low transaction costs; significant flexibility Wide coverage; adds value for some segments Face-to-face unstructured
Increasing richness and flexibility
Physical Intermediary
Point of Contact--Agency, Point of Sale
Variable---depends Often lost on operator
Ref: Place to Space: Peter Weill & Michael R. Vitale
Summary of E-Broker Business Models
Business Model Sources of A. Direct to Customer Transaction fees and/or Subscriptions owining the customer Revenue Payment for content Owns Relationship E-broker Level of Intimacy for Highly intimate for Primary Customer Relationship Own Transaction Own Data brokerage and investments E-broker E-broker financial picture E-broker E-broker and FSP Customer's total financial E-broker E-broker and perheps the vortal Customer profiles and E-broker E-broker Customer segment profiles relationship FSP Highly intimate on full customer relationship and being specialized FV Medium B. Full-Service Provider (FSP) E-broker: Transaction fees FSP: Fee for service and C. Intermediary-D. Intermediary--Portal Financial Vortal (FV) with Advertising E-broker: Transaction fees E-broker: Transaction fees FV: Fee for owning the Portal: Fee for delivering potential customer to advertisers and service providers Portal Low
Type of Information Operations cost and prospects and Market Needed to Succeed intelligence
picture
product information
and preferences
Ref: Place to Space: Peter Weill & Michael R. Vitale
Knowledge Management Capabilities and Organizational Effectiveness
Technology Structure Knowledge Infrastructure Capacity
Culture
Organizational Effectiveness Acquisition
Conversion
Application
Knowledge Process Capability
Protection
Ref: Gold, Malhotra, Segars, Journal of Management IS
Perform IT Effectiveness Assessment
Understand Current ITS Framework ITS Organization Assessment Business Perspective Develop Conclusions and Recommendations Develop Implementation Strategy Priorities Near-term actions Long-term actions
Governance Organization Key Processes Cost User Relations Application Portfolio
Planning Administration Performance measurement ITS Department reviews Cost effectiveness
Business direction Business Performance Measures User View of IT Service expectations Future system requirements
Findings IT organization comparisons Issues Recommendations
Where is the Client Today?
Ref: Transition Partners
DISRUPTIVE TECHNOLOGY MAP
New Markets
BREAKTHROUGHS
WATCHFUL WAITING
Existing Markets
ENHANCEMENTS
CATEGORY KILLERS
Existing Technology
New Technology
Ref: Medtronic Technology Team, Clayton Christensen
Corporate Goals for IT
High
Operations Focus Use IT to gain better control over business processes
Dual Focus IT is key to current and future business success
Unfocused
Market Focus
No clear goals for IT
Low Low
Goals for IT are externally focused
Strategic Positioning (reach and structure)
High
Internal Impact of Potential B2B Interactions
Business Partners
Information sharing with business partners Integrated Applications
Distribution Channels
Collaboration and information sharing with channels
Operations
Interacting with Net Markets
Product & Service Development Logistics & Fulfillment
Marketing, Sales
& Service
Net Market
Personalized and improved customer relationships
Collaboration and information sharing with suppliers
Suppliers
Ref: NerveWire : www.nervewire.com
Customers
THE IO MODEL (1 of 2)
Information Orientation (IO) Measures the capabilities of a company to effectively manage and use information
Information technology practices (ITP) capability The capability of a company to effectively manage appropriate IT applications and infrastructure in support of operational, decision-making and communication processes
Information management practices (IMP) capability The capability of a company to manage information effectively over its life cycle
Information behaviors and values (IBV) capability The capability of a company to instil and promote behaviors and values in its staff for effective use of information Integrity Is an organizational value manifested through individual behavior that is characterized by the absence of manipulating information for personal gains such as knowingly passing on inaccurate information, distributing information to justify decisions after the fact or keeping information to oneself. Good information integrity results in effective sharing of sensitive information
Sensing Involves how information is detected and identified concerning: economic, social and political changes; competitor’ innovations that might impact the business; market shifts and customer demands for new products; and anticipated problems with suppliers and partners
IT for operational support Includes the software, hardware, telecommunication networks and technical expertise to control business operations, to ensure that lower-skilled workers perform their responsibilities consistently and with high quality and to improve the efficiency of operations IT for business process support Focuses on the deployment of software, hardware, networks and technical expertise to facilitate the management of business processes and people across functions within the company and externally with suppliers and customers
Collecting Consists of the systematic process of gathering relevant information by profiling information needs of employees; developing filter mechanisms (computerized & non-computerized) to prevent information overload; providing access to existing collective knowledge; and training and rewarding employees for accurately and completely collecting information for which they are responsible
Formality Refers to the degree to which members of an organization use and trust formal sources of information. Depending on the size, virtualness, and geographic dispersion of an organization, this balance shifts towards more formal or informal information behavior Control Is the disclosure of information about business performance to all employees to influence and direct individual and, subsequently, company performance
Ref: Marchand, Kettinger, Rollins
THE IO MODEL (2 of 2)
IT for innovation support Includes the software, hardware, telecommunication networks and capabilities that facilitate people’s creativity and that enable the exploration, development and sharing of new ideas. It also includes the hardware and software support to develop and introduce new products and services Organizing Includes indexing, classifying and linking information and databases together to provide access within and across business units and functions; training and rewarding employees for accurately and completely organizing information for which they are responsible Sharing Is the free exchange of non-sensitive and sensitive information. Sharing occurs between individuals in teams, across functional boundaries and across organizational boundaries (I.e. customers, suppliers and partners)
IT for management support Includes the software, hardware, telecommunication networks and capabilities that facilitate executive decision-making. It facilitates monitoring and analysis of internal and external business issues concerning knowledge sharing, market developments, general business situations, market positioning, future market direction and business risk
Processing Into useful knowledge consists of accessing and analyzing appropriate information sources and databases before business decisions are made. Hiring, training, evaluating and rewarding people with analytical skills is essential for processing information into useful knowledge
Information transparency Occurs when an organization’s employees trust each other enough to talk about failures, errors and mistakes in an open and constructive manner and without fear of unfair repercussions
Maintaining Involves reusing existing information to avoid collecting the same information again, updating information databases so that they remain current and refreshing data to ensure that people are using the best information available
Information Proactiveness Occurs when an organization’s staff actively seek out and respond to changes in their competitive environment and think about how to use this information to enhance existing and create new products and services
Ref: Marchand, Kettinger, Rollins
External IT Strategy Model
Sector
Context
Delivery
IT is the means of of delivering goods and services Computer-based transaction systems underpin business
Dependent
Business strategies increasingly depend on IT Business and functional strategies are automated
Drive
IT potentially provides new strategic opportunities Specific applications are exploited
Delayed
IT has no strategic impact Opportunities not yet apparent
Characteristics
Information management style Planning Organization Control Technology
Integral Corporate Tight-loose Architectural
Derived Business unit Loose-tight Pragmatic
IT-push Line Loose Enabling
Default IT Tight Ad hoc
Implied planning styles
Adapted from Earl (1989)
Bottom-up
Top-down
Inside-out
None
Four Types of Product/Process Development Projects
Research and Advanced Development New Core Process Breakthrough or Radical Platform or Next Generation
Process Changes
NextGeneration Process Single Dept. Upgrade Tuning and Incremental
Product Changes
New Core Product Next-Generation Product
Addition to Product Family
Add-ons and Enhancements
Derivative (Enhancements, Hybrids, and Cost Reduced Versions
Ref: Revolutionizing Product Development – Steven C. Wheelwright & Kim B. Clark
A Theoretical Model of Mind-Set Formation and Influence in Digital Environments
Modified Goals
Goals to Be Attained
Evaluation of Experience
Knowledge and Experience
Selection of Mind-Set • Implemental • Deliberate • Exploratory
DE Navigation Characteristics • Which sites to visit • How long to stay • What information to search
Changed Emotion
Emotional State
Specific Evaluation
• Brand Image • Web site • Firm image
Ref: Dholakia & Baguzzi
ANTHONY’S TRIANGLE
Information Content Policies Plans Budgets Objectives Measurement Schedules Revenues Profits Costs Performance Services Goods Management Level Information Characteristics External Source Wide Scope Ad Hoc Unscheduled Future-Oriented Infrequent Summarized Internal Source Narrow Focus Pre specified Scheduled Historical Frequent Detailed
Strategic
Tactical Operational
Responsibility Authority
ZACHMANN
FIRM INFRASTRUCTUTRE
HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT
Information Systems Technology Planning and Budgeting Technology Office Technology Training Technology Motivation Research Information Systems Technology Product Technology Computer Aided Design Pilot Plant technology Software Development Tools Information Systems Technology
PROCUREMENT
Information Systems Technology Communications Systems technology Transportation Systems technology
Basic Process Technology Materials Technology Machine tool technology Material Heading Material handling technology technology Storage and preserve Packaging technology technology Maintenance methods Communication sys. Testing Technology Technology Building Design Information Sys.Technology Operational Technology Information System technology Transportation Technology Transportation Technology Material Handling Technology Packaging Technology Media Technology Diagnostic and Testing Technology
Communication Sys. Technology
Information system technology
Audio & Video Communication System Technology Recording technology Information system Communication technology Sys. Technology Information System technology
INBOUND LOGISTICS
OPERATIONS
OUTBOUND LOGISTICS
MARKETING & SALES
SERVICE
Representative Technologies in a Firm’s Value Chain
INFORMATION VALUE CHAIN
DATA COLLECTION AND TRANSMISSION
DATA MANAGEMENT
DATA INTERPRETATION: INFORMATION
MODELS
DECISION SUPPORT SYSTEMS
•Customer files •Casual data •POS •diary Panels •inventory •Availability •HHC www •Benchmark •Buy
•Relational •Objects •Spreadsheet •Hypertext •ISO
•GDSS •Time - Varying •EIS Mass •Graphical Produced •GIS •Robust •PDA •Adaptable •Summary •NeuralNets •Statistics •Simulation •Multimedia •Virtual Reality
•K systems •KBS •Models vs. Managers •Adaptations to Managerial Inputs
A FRAMEWORK FOR ELECTRONIC COMMERCE
Evaluation:
Framing the Market Opportunity
Business Model
Customer Market Imple Metrics Communications Interface mentation And and Branding valuation
e-Commerce Strategy
Network Infrastructure
Media Infrastructure
Market Infrastructure
Public and Politics
Factors Determining a Technology’s Acceptance
Platform Availability
Stable Platform
Affordability
Convenience
Source: Stephen P.Bradley and Richard L.Nolan, eds., Sense and Respond(Boston Harvard Business School Press, 1999).
PORTER’S FIVE FORCES MODEL (including the major determinant of each force)
Threat of substitute products or services
(+) By making the overall industry more efficient, the Internet can expand the size of the market () The proliferation if Internet approaches creates new substitution threats
Buyers Bargaining power of suppliers Rivalry among existing competitors
Bargaining power of channels Bargaining power of end users
(+) Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give suppliers access to more customers
(-) The Internet provides a channel for suppliers to reach end users, reducing the leverage of intervening companies (=) Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurements to standardized products that reduce differentiation () Reduced barriers to entry and the proliferation of competitors downstream shifts power to suppliers
() Reduces differences among competitors as offerings are difficult to keep proprietary
(+) Migrates competition to price (-) Widens the geographic market, increasing the number of competitors () Lowers variable cost relative to fixed cost, increasing pressures for price discounting
(+) Eliminates powerful channels or improves bargaining power over traditional channels
() Shifts bargaining power to end consumers (-) Reduces switching costs
() Reduces barriers to entry such as the need for a sales force, access to channels, and physical assets, anything that Internet technology eliminates or makes easier to do reduces barriers to entry
(-) Internet applications are difficult to keep proprietary from new entrants
Barriers to entry
() A flood of new entrants has come into many industries
Professor Luftman’s Books
T-PORTFOLIO TEMPLATE
Low IT SHAPING BUSINESS High
High
IT SUPPORTING BUSINESS
Low
TODAY
Ref: Competing in the Information Age by Jerry N. Luftman
TOMORROW
SUSTAINABLE COMPETITIVE ADVANTAGE AND BARRIERS TO IMITATION
Competitive Threats
IT Project Barrier
IT-Enabled Sustainable Competitive advantage
Preemption Barrier
Complementary Resource Barrier
Competitive Threats
Ref: Competing in the Information Age by Jerry N. Luftman
IT Resource and Capability Barrier
FRAMEWORK FOR BUSINESS INTEGRATION
Resource/integration need Organizational units (functions/departments) Examples of integration mechanisms E-mail, collaborative software, lateral teams Top management strategy, budgets, performance metrics E-mail, collaborative software, knowledge management systems Organization policies/structure Enabling environment/infrastructure
Ref: Competing in the Information Age by Jerry N. Luftman
Organizational integration
Decision makers
Face-to-face meetings, job design, performance metrics
Workflow, collaborative systems, SCM, CRM, Web services Process owners, teams, performance metrics, service level agreements Inter-process communication, RPC, messaging, ERP, Web services Data dictionaries Databases, XML Networks Standards
Systems integration
Business processes (both internal & external to the firm)
Systems architecture
Applications
Data
Platforms
THE INTEGRATION POINTS BETWEEN COMPANIES
Financial Service Provider Other Exchanges Logistics Provider
Buying Organization
Marketplace Value-Added Services Hosted Infrastructure Services
Selling Organization Supplier Order Management
Desktop Procurement
Transaction Engine
Enterprise Systems
Plan and Manage the Enterprise
Enterprise Systems
EDI VAN/ETN Ref: Competing in the Information Age by Jerry N. Luftman
FOUR NEW PRINCIPLES FOR IT
Driver Tier One
Rolling Plans
Provides
Bridge Between Short Term Horizon and Long Term Foundations
Three Tier Architecture
Portfolio of “Ventures”
Translates Plans into Development Projects
Sets Technical Guidelines
Work on Tier One and New Tier Three Applications
Provides Framework for Collaboration
New Venture Development
Cast Changes with Phases
MultiDisciplinary Teams
Ref: Competing in the Information Age by Jerry N. Luftman
The Six Phases of Business Transformation
New Core Competency
PERFORMANCE FOCUS
Scope Value-added Processes and Services
PHASE VI Operating Initiatives PHASE IV Business Enhancement PHASE V Strategy and Organization Redefinition PHASE II Process Improvement PHASE I Strategy Initiative
Infrastructure
Excellence and Efficiency
PHASE III Infrastructural Design and Deployment
External Drivers
New Direction
Internal Operations
Alignment Customer and and Supplier Architecture Interface
Redefinition
New Business units
ORGANIZATION FOCUS
The IT Platform
Anyone anywhere Customers Partners regardless of facility base
REACH
Whom
Customers partners w/same IT facility base
Intracompany, locations abroad
RANGE
What Services Can We Deliver
Standard messages
Access to stored data
Internal locations
Single Transactions
Cooperative transactions
The Adaptive Loop
Sense
Sensing
Act
People in Roles Accountable for Outcomes
Interpret
Decide Responding
Observe Orient Decide Act Loop
REF : STEVE HAECKEL
Increased control Better Information Better integration Improved quality
Increased sales Competitive advantage Competitive necessity Market positioning
Informational
Strategic
Transactional Infrastructure
Cut costs increase throughput
Business Integration Business flexibility Reduced marginal cost of business unit IT Reduced IT Costs Standardization
Characteristic
Global exporter
Homogeneous
Multinational
Homogeneous,some customized Distributed but highly controlled by home country Sharing innovations outbound from H.Q
Multilocal
Customized,some homogeneous Highly duplicated in each country Local responsiveness
Global
Flexible architecture allowing for mass customization Highly networked and distributed around the globe EOS of production and knowledge,and low cost/customer driven Decisions made at centers of competence Supports global and local customers
Products and services Value chain activities Basis of competition
Highly concentrated in home country Economies of scale in production
Organization
Home country nationals Global or local customers get the same treatment
H.Q.controls national companies Local customers supported by national sales companies global customers with difficulty
Customers
Strong national organizations,H.Q .plays primarily financial role Local customer focus,global customers only with great difficulty
Business Characteristics of Global Exporter,Multinational, Multilocal,and Global Companies
Consulting Methods
SIM Information Systems Planning Approach
1 SIM Vision & Mission
Governance
5 Target IS Capability Strategy for Achieving Target
7
2
SIM 2001 Strategies & Goals
Critical Success 3 Factors & Guiding Principles
6
Current IS Capability
8 Project Plans
4
Technology Projections
10
Periodic Updates
9 Execute Plans
SIM IS Strategy Steering Committee, facilitated by Dr. Luftman
The Scale and Scope of Business Process Reengineering
Extensive
Functional Integration
Business Redefinition
Scale of BPR
[ORGANIZATIONS] Limited Functional Refinement Process Redesign
Narrow
Broad Scope of BPR [VALUE CHAIN]
Ref: Hammer, HBR 1990
PROFIT PATTERNS
Mega Patterns
No profit Back to profit Convergence Collapse of middle De Facto standards Technology shifts the board
Value Chain Patterns
Customer Patterns Channel Patterns Product Patterns Knowledge Patterns Organizational Patterns
Disintegration
Value chain squeeze
Strengthening the weak link
Reintegration
Profit shift
Microsegmentation Channel concentration Producer to blockbuster
Power shift
Redefinition
Multiplication
Compression
Reintermediation
Product to brand
Profit multiplier
Product to pyramid
Product to solution
Product to customer knowledge
Operations to knowledge
Knowledge to product
Skill shift
Network
Cornerstoning
Conventional to digital business design
Ref: Profit Patterns by A.Slywotxky, D. Morrison, T. Moser, K. Mundt & J. Quella; Random House, 1999
Service Profit Chain
Internal service quality
Employee loyalty Employee satisfaction
Employee productivity
External service value
Revenue growth Customer satisfaction Customer loyalty Profitability
Source: Service Management Interest Group, Harvard Business School
Cause and Effect (Fishbone or Ishikawa) Diagram
A cause and effect of Fishbone Diagram represents the relationships between a given effect and it’s potential causes (cause and effect analysis).Cause and Effect Diagrams are drawn to sort out and relate the interactions among the factors affecting a process.A well-detailed Cause and Effect Diagram will take the shape of a fishbone
Category
Cause Cause
Category
Cause Cause Effect
Cause
Cause
Category
Category
SA MATURITY FISHBONE
Partnership
IT as cost center Insufficient role of IT in business strategy
Perceived as service organization
Scope Architecture
poor architecture Slow to move IT lack credibility IT infighting bad experience Little synergy of systems and data
Skills
IT lack business knowledge at all levels Training is left to the individual
IT not committed to understand business
quality issues No commitment to learn business (IT) No portfolio mgmt. Lack standards
Incentives not aligned with business
IT not aware of business direction No knowledge management Info not communicated Pockets of understanding
Value measurements are non-existent SLA at functional level, not enforced
No benchmarking Conflicting metrics Not in terms of the business No feedback to PMC
Strategic Alignment Maturity
IT not involved at executive level CIO does not report to CEO IT not embraced by all senior mgmt.
Communications
Competency/ Measurement
Governance
Customer Relationship Management Model
Create a Database
Analysis
Customer Selection Customer Targeting Relationship Marketing Privacy Issues Metrics
Ref: A framework for CRM, Russell S. Winer
Six Thinking Hats Technique
Blue hat thinking: Facilitates the thinking process White hat thinking: An objective look at data and information Green hat thinking: New ideas and creative thinking Red hat thinking: Legitimizes feelings, hunches, and intuition Black hat thinking: Logical negative, judgment and caution Yellow hat thinking: Logical positive, feasibility and benefits
Book by ED DeBono
This is the IDEO way
Five steps in the process of designing a better consumer experience
1. OBSERVATION 2. BRAINSTORMING • • • • • • • Defer Judgment Build on the ideas of others Encourage wild ideas Go for quantity Be visual Stay focused on the topic One conversation at a time 3. RAPID PROTOTYPING • • • • • • Mock up everything Use Videography Go fast No frills Create scenarios Body storm
• • • • • • •
Shadowing Behavioral Mapping Consumer Journey Camera Journals Extreme User Interviews Story Telling Unfocus Groups
4. REFINING • • • • • • Brainstorm Focus Prototyping Engage the client Be disciplined Focus Get agreement
5. IMPLEMENTATION • • Tap all resources The workforce
REF: BusinessWeek
H/R, VALUE, CHANGE, CREDIBILITY, QUALITY
Reinventing Core Strategies and Creating Industry Revolution
Yes
Slow-Moving Bureaucrats
Can your company reinvent its strategy Cost and Efficiency Addicts One-Time Visionaries
Gray-Haired Revolutionaries
No
No
Can your company create an industry revolution?
Yes
Ref: LEADING THE REVOLUTION, Hamel
Seven Organizational Change Propositions
Radical Exchange dominates change Reengineering 2: Transformation as the invention of a business coalition
Market redefinition
Supply-chain expansion Supply-chain discovery
Range of Organizational/ technological discontinuity
Business process redefinition
Business model refinement
Efficiency dominates change
Business process redesign
Incremental
Business process improvement
Process Business model
Reengineering 1: Transformation as an improvement or refinement of an existing business model
Supply chain
Markets
Ref: Albert H. Segars and James W. Dean
View of the Commitment Management Protocol
Customer role
Define
Asses s
Type of communication
Request
Agree
Report
Accept
Supplier role
Negotiate
Perform
TIME
Ref : Steve Haeckel
The Logics of Alliance Value Creation
GLOBALIZATION ”Racing for the World”
Building Critical Mass
Reaching New Markets
Plugging skill gaps
Gaining Competitive Strength through Cooption
Leveraging Cospecialized Resources
Gaining Competence through Internalized Learning
Building Nodal Positions in Coalitions
Creating New Opportunities
Building New Competencies
”Racing for the Future” TECHNOLOGY
Ref; Yves L. Doz & Gary Hamel, Alliance Advantage
How Team Design Shapes Team Performance Processes
Compelling direction
Energizes
Enabling team structure
+ Team Task Design
Supportive organizational context
+ Reward System
Team performance processes
Effort
Orients Attention
+ Norms of Conduct
+ Information System
Performance Strategy
Engages Talents
+ Team Composition
+ Educational System
Knowledge and skill
Ref: J.Richard Hackman “Leading Teams”, HBS
Guiding Stars: The Four Factors
Leadership
People Systems STAR
Structure & Governance
Ref : Lorsch Tierney, HBS
Culture
The Six Leadership Styles at a Glance
Coercive Authoritative Affiliative
The leader’s Demands modus immediate operandi compliance The style in a “Do what I phrase tell you” Drive to Underlying ach ieve, emotional initiative, intelligence self-control competencies When the style works best In a crisis ,to kick start a turnaround, or with problem employees Negative Mobilizes people toward a vision
Democratic Pacesetting
Coaching
Creates harmony Forges and builds consensus emotional bonds through participation “People come first” “What do you think?”
Sets high sta ndards Develops people for performance for the future
“Come with me”
“Do as I do, now.” “Try this”
Self confidence, Empathy, Collaboration, Conscientiousness, Developing empathy, change building team leadership, drive to achieve, others,empathy, catalyst relationships, communication initiative self-awareness Communication When changes require a new vision or when a clear direction is needed Most strongly positive To heal rifts in a team or to motivate people during stressful circumstances Positive To build buy -in To get quick results To help an or consensus, or from a highly employee to get input from motivated and improve valuable competent team performance or employees develop long term strengths Positive Negative Positive
Overall impact on climate
REF : DANIEL GOLEMAN, HARVARD BUSINESS REVIEW, April 2000
The Open-Innovation Model
Types of Innovation Generators
How
Explorers
Merchants
Architects
Missionaries
Discover
Discover and sell to others
Coordinate
Serve a cause
Purpose
For innovation’s sake Xerox PARC Telcordia
For commercial goal Qualcomm
For a portion of the commercial benefit Nokia
For the benefit of others Linux
Examples
“The Open-Innovation Model,” by Chesbrough, MIT Sloan Management Review, Spring 2003, vol. 44, no. 3
Three Value Levels of the Firm
Do Maximum Good… i.e., Create Maximum Value
Open Enterprise Organization Culture Maximizes the creation of value simultaneously in economic, social, Level 3 and ecological terms. Relationship Management Culture Value created but typically traded off, usually after the demands of investors are satisfied.
Level 2
Do Minimum Harm… i.e., Avoid Destroying Value
Level 1
Compliance Culture Preserves value consistent with laws and norms and seeks to avoid the unacceptable destruction of value (economic, social, or ecological.)
Ref: Wheeler, Colbert, & Friedman; The Naked Corporation by Don Tapscott and David Ticoll
The Focus – Energy Matrix
high
Disengagement
Purposefulness
Focus
Procrastination
Distraction
low
REF: HEIKE BRUCH SUMANTRA GHOSHAL
Energy
high
Migration Patch of Layered Organizational Change
Migration Path
Stage 1: Finding Near-Term Profitability
Stage 2: Creating Focus
Stage 3: Accelerating Growth
Primary Lever for Change
Developing New Skills •Process orchestration
Moving to New Structures
Designing New Systems
Key Areas
•Information Technology
•Three business types carved out as independent profit centers
•Performance measurement
•Rewards •Knowledge development / management
Ref: “Out of the Box” by John Hagel III, HBS
FIVE LEVELS OF LEADERSHIP
5 PERSONHOOD Respect People follow because of who you are and what you represent 4 PEOPLE DEVELOPMENT Reproduction People follow because of what you have done for them 3 NOTE: This is where long range growth occurs. Your commitment to developing leaders will insure ongoing growth to the organization and to people. Do whatever you can to achieve and stay on this level NOTE: This is where success is sensed by most people. They like you and what you are doing. Problems are fixed with very little effort because of momentum. NOTE: This step is reserved for leaders who have spent years growing people and organizations. Few make it. Those who do are bigger than life.
PRODUCTION
Results People follow because of what 2 PERMISSION Relationships People follow because they want to 1 POSITION Rights People follow because you have done for the organization
NOTE: People will follow you beyond your stated authority. This level allows work to be fun. Caution: Staying too long on this level without rising will cause highly motivated people to become restless.
NOTE: Your influence will not exceed beyond the lines of your job description.
they have to
The longer you stay here, the higher the turnover and the lower the morale.
Ref: John C.Maxwell; Developing the Leader Within You
Designing a TQM program
Define the TQM vision Identify a set of measurable objectives and related strategy
Set up a project team
Implement training program on TQM for staff concerned Define quality control model with measuring functions and parameters Design Instrument for data collection and output required Estimate and gather resources required Design continuous improvement management strategies Design and development of an MIS Collect data and generate output report Collect Data and generate output report Ensure continuous improvement
ORGANIZATION
Economic Capital Operations Loop
Financial and Physical Capital + Value Processes Intellectual and Human Capital + Transformational Processes
Strategic Capital
Plans Loop
Economic Capital
Investments Gifts and Dividends
Outside World
Knowledge and Talent
Options Value (B-s)
Risk
Diminishing Returns Innovation
Ref: Boer, Real Options Solutions
Drivers of globalization
Global market convergence
•Similar customer needs •Global customers •Transferable marketing
Government influence
•Trade policies •Technical standards •Host government policies
Global strategies
•Scale economies •Sourcing efficiencies •Country-specific costs •High product development costs
Cost advantages
•Interdependence
•Competitors global •High exports / imports
Global competition
Ref: G. Yip, Total Global Strategy
CRM can lift revenues (acquisition, retention, cross-sell) as well as reduce expenses (efficiency, effectiveness). Most organizations have focused on the revenue generating aspects of CRM. However, in light of recent changes in the business climate and the economy, companies must begin to realize the cost reduction benefits of CRM
BOTH SIDES OF THE ‘CRM EQUATION’ PROFITABILITY Financial Performance Customer Strategy Revenue Process Drivers Organization and Technology Enablers Cost
X-sell/Up-sell
Management Effectiveness
Channel Optimization
Efficiency
MARKETING SALES SERVICE
Ref: Price Waterhouse Coopers
Eight Steps to Transforming Your Organization ( 1 of 2)
Establishing a sense of urgency
Examining market and competitive realities Identifying and discussing crises, potential crises, or major opportunities
1 2 3 4 5
Forming a Powerful Guiding Coalition
Assembling a group with enough power to lead the change effort Encouraging the group to work together as a team
Creating a Vision
Creating a vision to help direct the change effort Developing strategies for achieving that vision
Communicating the Vision
Using every vehicle possible to communicate the new vision and strategies
Teaching new behaviors by the example of the guiding coalition
Empowering Others to Act on the Vision
Getting rid of obstacles to change Changing systems or structures that seriously undermine the vision Encouraging risk taking and nontraditional ideas, activities, and actions
Eight Steps to Transforming Your organization ( 2 of 2 )
Planning for and Creating Short-Term Wins
Planning for visible performance improvements Creating those improvements Recognizing and rewarding employees involved in the improvements
6 7
8
Consolidating Improvements and Producing Still More Change
Using increased credibility to change systems, structures, and policies that don’t fit the vision Hiring, promoting, and developing employees who can implement the vision Reinvigorating the process with new projects, themes, and change agents
Institutionalizing New Approaches
Articulating the connections that new behaviors and corporate success
Developing the means to ensure leadership development and succession
Marketing, Product Innovation
Delta Method: Three Distinct Strategic Options
Competition Based on System Economics: Complementor lock-in, competitor lock-out, proprietary standard
System Lock-in
Customer Solutions
Competition Based on Customer Economics: Reducing customer costs or increasing profits
Ref: Wilde & Hax, Sloan Management Review, Winter 1999
Best Products
Competition Based on Product Economics: Low cost or differentiated position
Marketing evolution with characteristics and technology attributes
Mass Marketing
Target Marketing
Customer Marketing
1 to 1 Marketing
Characteristics • Market Share • Individual Sales • Limited Segmentation • Huge Campaigns • Not Cost-effective • Single Treatments • Focus on Transactions • # of Relationships
Characteristics • Segmented Campaigns • Small Mass Marketing • Focus on Products
Characteristics • Customer Share • Life Time Value • Model Distribution • On-going Refinement • Multiple Treatments • Focus on Customers • Breadth of Relationships • Event-Driven
Characteristics • Interactive Segmentation • Real-Time Matching • Interactive TV • Active Web Pages • Customer Interaction • One to One Relationships • Real-Time Marketing • Prediction-Driven
Technology • In-House • Outsourced Mailings • Flat Files/Mailing Lists • Some Packaged Appl’s
Technology • Individual Database (s) • Application for Projects • Proprietary Solutions • Limited Analysis
Technology • Data Warehouse • Integrated Data & Appl’s • Customer Knowledge • Modeling, Analysis & Refinement Process
Technology • Integrated Data Warehouse • Internet Enabled • Many Touch Point Integrated • Cross Organization Process • Management by Interaction
REF: Accelerating Customer Relationships by Ronald S. Swift
The Spectrum of Co-Creation Experiences
Increasing Complexity of the Consumer-Firm Interaction
Co-Creation Experience Firm and consumer (one to one) Variety of Co-Creation Experiences Firm and Consumer Communities (one to many) Personalization of the Co-Creation Experiences Multiple Firms and Multiple Communities (Many to many)
Increasing Uniqueness of Value
REF: The Future of Competition – Co-Creating Unique Value with Customers, by C.K. Prahalad, Venkat Ramaswamy
Enhance Add functionality or features to current product/service offerings or improve performance of existing business
Extend Enter new line of business and/or add new business models
Extend
Enhance
Expand
Exit
Exit Exit a business or market or drop a product/service offering
Expand Add new product/service offerings or enter new geographic markets
Ref: Corporate Information Strategy & Management by Lynda M. Applegate, Robert D. Austin & F. Warren McFarlan
DRUCKER’S SEVEN SOURCES OF INNOVATION
1. 2. 3. 4. 5. 6. 7.
HBR Nov-Dec 1998
The unexpected Incongruities Process need Structured change Demographics Perception New Knowledge
Product Process Change Matrix
Mass Customization
Invention
Mass
Production
Continuous Improvement
Stable
Dynamic
Process Change
Competing in the Information Age: Strategic Alignment in Practice
New Product Team Learning Strategies
Evolutionary Market Innovation New Market Model Strategy Incremental Innovation
Discontinuous Innovation New Venture Unit Strategy Evolutionary Technical Innovation Technical Entrepreneur Strategy
Cost Reduction Strategy
Existing
New
Technology
Ref. Gary.S.Lynn
THE FOUR CATEGORIES OF COMMUNICATIONS
Direct
•Sales force •Retail Sales •Customer Service Representative
Personalized
•Permission Marketing •Personalized Recommendations •Personalized Advertisements •Personalized Webpages •Personalized Upsell •Personalized e-Commerce
Traditional Mass Marketing
•Television •Radio •Print •Billboards •Superior Customer Service
General Approaches
•Banner Ads •E-Mail •Viral Marketing •Portal Sponsorship/Exclusive Agreements •Associate Programs •Online and Offline Partnerships •Provide Information to Entice Customer Purchase •Leverage Customer Base
Ref: e-Commerce, Jeffrey F. Rayport, Bernard J. Jaworski
THE P CYCLE OF A SUCCESSFUL BUSINESS IDEA
Program
Perspective Managerial awareness Project Pervasiveness Pilot Progenitor
Time
Ref: Ideas at Work by Thomas H Davenport & Laurence Prusak with H. James Wilson
The New Competitive Space for Innovation
Enhanced Network of Competence Including Communities
Experience Networks Experience Integration Supply Networks Systems Integration Experience Innovation
LOCUS OF COMPETENCE
Extended Enterprise
The Firm, and its Supply Base
Supply Chains Product Innovation Product Space Solutions Innovation Experience Innovation Experience Integration
Solutions Space
LOCUS OF INNOVATION
Ref: Clark Gilbert & Sloan Management Review, 2003
The Cultural-Bias Landscape
Strong High-Tech Startups, Labs, Think Tanks, Artisans High-Value Product and Service Companies MORE INNOVATION, MORE CULTURAL TENSION
PRODUCTINNOVATION CULTURAL BIAS
Dominant Design Emerges
High-Volume Product and Service Companies, Upscale Retailers LESS INNOVATION, LESS CULTURAL TENSION Distribution and Logistics Companies Discount Retailers
Weak Weak
BUSINESS-INNOVATION CULTURAL BIAS
Strong
Ref: “Shifting Cultural Gears in Technology – Driven Industries” by Paul J.Kampas; MIT Sloan Management Review, Winter 2003 Vol.44.No.2
ARCHETYPAL BRAND POSITIONS
THE REIFIED – ENACTED BRAND • Harley-Davidson • Ben and Jerry’s (brand is strongly linked to the material product/service and is used to generate meaning and identity)
ENACTED (focus on what it means rather than what it can do)
THE ABSTRACTENACTED BRAND • Tiffany • Virgin • Harrods (brand is independent of product, or even groups of products, and is used to generate meaning and identity)
REIFIED (brand closely identified with product)
THE REIFIED-FUNCTIONAL BRAND • WD40
ABSTRACT (brand almost product-independent)
THE ABSTRACTFUNCTIONAL BRAND • Co-ops • U.S. Department of Transportation (brand is relatively independent of product, or even groups of products, and is primarily utilized for its functionality)
• Crest
• Life Savers • Copperslip (brand is strongly linked to the material product/service and is primarily utilized for its functionality)
FUNCTIONAL (focus on what it can do rather than what it means)
Ref: “Understanding and Managing the Brand Space” – Pierre Berthon, Morris B.Holbrook and James M.Hulbert; MIT Sloan Management Review, Winter 2003 Vol. 44 No.2
Choosing a Loyalty Strategy
Butterflies
High Profitability
• good fit between company’s offerings and customer’s needs • high profit potential Actions: • aim to achieve transactional satisfaction, not attitudinal loyalty • milk the accounts only as long as there are active •Key challenge is to cease investing soon enough True friends
• good fit between company’s offerings and customer’s needs
• highest profit potential Actions: • communicate consistently but not too often • build both attitudinal and behavioral loyalty • delight these customers to nature, defend, and retain them
Barnacles Strangers
Low Profitability
• little fit between company’s offerings and customer’s needs • lowest profit potential Actions: • make no investment in these relationships • make profit on every transaction • limited fit between company’s offerings and customer’s needs • low profit potential Actions: • measure both the size and share of wallet • if share of wallet is low, focus on up-and cross- selling •If size of wallet is small, impose strict cost controls Short-term Customers
Ref. HBR, ”The Mismanagement of Customers Loyalty” – Werner Reinartz and V.Kumar
Long-term Customers
MARKET SEGMENTATION APPROACHES
Segmentation Type
Geographics Demographics
Description
Divides market into different geographical units Divides market on the basis of demographic variables Divides market on the basis of companyspecific variables Divides market based on how customers actually buy and use the product Divides market on the situation that leads to a product need, purchase, or use Divides market based on lifestyle and/or personality Divides market based on benefits or qualities sought from the product
Examples - Variables
Country, region, city
Age, gender, income
Firmographics
Number of employees, company size Website loyalty, prior purchases Routine occasion, special occasion Personality (laid-back, type A), lifestyle Convenience, economy, quality
Behavioral
Occasion (Situational) Psychographics
Benefits
Ref: Jeffrey F.Rayport, Bernard J.Jaworski
THE EXPERIENCE ECONOMY
Economic Offering Economy Economic function Nature of offering Key attribute Method of supply Seller Buyer Factors of demand Commodities Agrarian Extract Fungible Natural Stored in bulk Trader Market Characteristics Goods Industrial Make Tangible Standardized Services Service Deliver Intangible Customized Experiences Experience Stage Memorable Personal Revealed over a duration Stager Guest Sensations
Inventoried after Delivered on production demand Manufacturers User Features Provider Client Benefits
REF : B.JOSEPH PINE II , JAMES H. GILMORE
The Buyer Utility Map
By locating a new product on one of the 36 spaces shown here, managers can clearly see how the new idea creates a different utility proposition from existing products
The Six Stages of the Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
Customer Productivity Simplicity
The Six Utility Levers
Convenience
Risk
Fun and Image Environmental Friendliness
Source: Kim & Mauborgne, Harvard Business Review September-October 2000
Types of Competitive Advantage 1 of 3
Offer Advantage
Customer Advantage
Industry Advantage
Category Advantage
Ref: Geoffrey Moore, “Living on the Fault Line”
Four Value Disciplines
Operational excellence Focus Process efficiency Internal timing (rhythm) Customer intimacy Customer experience Customer response time
2 of 3
Disruptive Innovation Categorical differentiation Time to adoption
Product Leadership
Offer quality
Orientation To time
Competitive response time
Key metric
Number of misses
Number of hits
Product specifications
10X advantage
Culture fit
Control culture Operations, Finance
Collaboration culture Marketing, Customer support
Competence culture Sales, Engineering
Cultivation culture R&D
Organizational Leadership from
Ref: Geoffrey Moore, “Living on the Fault Line”
Competitive Advantage Grid 3 of 3
Offer Advantage Operational Excellence Customer Advantage Industry Advantage Category Advantage
Customer Intimacy
Product Leadership
Disruptive Innovation
Ref: Geoffrey Moore, “Living on the Fault Line”
Unbundling of Traditional Businesses
Customer Relationship Infrastructure Management Product Innovation and Commercialization Product innovation
Skills
Direct marketing
Operations
Economics
Economies of scope
Economies of scale
Efficiencies of speed
Culture
Service-oriented
Cost conscious
Creative culture
Ref: “Out of the Box” by John Hagel III, HBS
LEAD WITH AN ENTREPRENEURIAL MINDSET
•Set the climate •Orchestrate the process •Engage in hands-on leadership
ESTABLISH THE ENTREPRENEURIAL FRAME
•Set a challenging goal •Direct others’ attention to that goal •Make the goal a priority on your personal agenda
STOCK THE OPPORTUNITY REGISTER
•Redesign •Dedifferentiate •Resegment •Reconfigure •Build breakthrough competences
FOCUS ON THE BEST OPPPRTUNITIES
•Stratify to define target arenas •Define real options •Build a portfolio of opportunities to pursue
ADAPTIVE EXECUTION
•Define entry strategies and likely competitive response •Create discovery-driven plans •Assess project progress
Ref: THE ENTREPRENEURIAL MINDSET, Rita Gunther McGrath, Ian MacMillan
Customer Understanding
Be Unique Be Relevant Built Esteem Know & Understand
Attract Customers
Satisfy Customers
Keep Customers
Build Customers Bond & Loyalty
Advertise & Market
Meet Rational Needs
Meet Emotional Needs
Meet both Rational & Emotional Needs
Adapted from Interbrand, Y&R, & NOP World Group
A Holistic Marketing Framework
Demand Management Resource Management Network Management Collaborative Network
Customer Focus
Value Exploration
Core Competencies
Cognitive space
Competency space
Resource space
Market Offerings Value Creation
Customer benefits Business domain
Business Architecture
Business partners
Marketing Activities
Operational system
Internal resource management Business partner management
Value Delivery
Customer relationship management
Ref. Kotler, Jain, Maesincee - Marketing Moves
Demand Uncertainty
Low High
Supply Uncertainty
(Functional Products)
Low (Stable Process) High
(Innovative Products)
Efficient-supply chairs
Responsive supply chains Agile supply chains
Risk-hedging supply (Evolving chains Process)
Ref. Lee, California Management Review, Spring 2002
How CRM Works
LOYAL CUSTOMERS •Better responsiveness to customer needs Relationship •Increased customer satisfaction • increased ARPU* • Stronger brand
attitude
• less price sensitive • reduce customer churn
CRM Program
Customer Database • increased ARPU* • cost reductions Data Mining Cross-selling Better Target Marketing • more targeted communications • new customer insights
* ARPU = average revenue per user
Market Research
• early warning system
Eight Steps to Transforming Your Organization ( 1 of 2)
Establishing a sense of urgency
Examining market and competitive realities Identifying and discussing crises, potential crises, or major opportunities
1 2 3 4 5
Forming a Powerful Guiding Coalition
Assembling a group with enough power to lead the change effort Encouraging the group to work together as a team
Creating a Vision
Creating a vision to help direct the change effort Developing strategies for achieving that vision
Communicating the Vision
Using every vehicle possible to communicate the new vision and strategies
Teaching new behaviors by the example of the guiding coalition
Empowering Others to Act on the Vision
Getting rid of obstacles to change Changing systems or structures that seriously undermine the vision Encouraging risk taking and nontraditional ideas, activities, and actions
Eight Steps to Transforming Your organization ( 2 of 2 )
Planning for and Creating Short-Term Wins
Planning for visible performance improvements Creating those improvements Recognizing and rewarding employees involved in the improvements
6 7
8
Consolidating Improvements and Producing Still More Change
Using increased credibility to change systems, structures, and policies that don’t fit the vision Hiring, promoting, and developing employees who can implement the vision Reinvigorating the process with new projects, themes, and change agents
Institutionalizing New Approaches
Articulating the connections that new behaviors and corporate success
Developing the means to ensure leadership development and succession
CUSTOMER INTERFACE
CORE STRATEGY
STRATEGIC RESOURCES
VALUE NETWORK
Fulfillment & Support Information & Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for Differentiation
Core Competencies Strategic Assets Core Processes
Suppliers Partners Coalitions
EFFICIENT
/
UNIQUE
/
FIT
/
PROFIT BOOSTERS
Ref: LEADING THE REVOLUTION, Gary Hamel
GENERAL STRATEGIC GROUPS
by Henry Mintzberg
• • • • • • • •
•
• •
Niche Players: highly differentiated, usually by quality or design, with narrow scope core business like the Economist magazine Pioneers: very focused scope, highly innovative designs, first movers as in the origins of Apple computers or certain film companies Local Producers: undifferentiated strategies in particular geographic niches, like the corner gas station or the national post office Dominant firms: “heavy” cost leaders, whether resource producers upstream or mass marketers further down, with wide scope and often vertically integrated, like General motors Me-too firms: like dominant firms but not dominant, with copycat strategies Worldwide replicators: heavy on marketing, producing, and selling in individual markets around the world, according to formula like Coca-Cola or McDonald’s Professionals: providing established professional services to customers, such as consulting, engineering and accounting firms Thin producers: filling huge occasional contracts for customer, usually anywhere in the world, involving extensive design innovation and complex technology, like Boeing and an Airbus Rationalizers: so-called “global firms” that distribute production “mandates” around the world while selling to large segments on a wide geographic basis like an IBM or an IKEA Crystalline diversifiers or network firms: highly diversified, with wide scope and many producers differentiated by design, mostly created through internal development around core competencies, as in 3M Conglomerates: often made up of unrelated diversification by acquisition of dominant firms
Brand Revitalization Strategies
Refresh Old Sources of Brand Equity Create New Sources of Brand Equity
Expand Depth and Breadth of Awareness and Usage of Brand
Improve Strength, Favorability, and Uniqueness of Brand Associations
Increase Quantity of Consumption (How Much)
IncreaseFrequency of Consumption (How Often)
Bolster Fading Associations
Neutralize Negative Associations
Create New Associations
Identify Additional Opportunities to Use Brand in Same Basic Way
Identify Completely New and Different Ways to Use
Retain Vulnerable Customers
Recapture Identify Lost Neglected Customers Segments
Attract New Customers
REF : Keller,CALIFORNIA MANAGEMENT REVIEW Vol. 41 , No . 3
Customer Retention Programs
Frequency/Loyalty Programs
Customer Service Customer Relationship Management: Satisfaction Rewards Programs
Customization
Community Building
Ref: A framework for CRM, Russell S. Winer
Customer relationship management model
Stage 4
Stage 3
Stage 2 Customer Repeat retention & customers customer loyalty Customer acquisition One-time purchase
Trust
Stage 1
Life value management
Customer attraction
Loyalty
Ref: Global e-Commerce, Ali Farhoomand with Peter Lovelock
Generic Roles of National Organizations
High
Black Hole
Strategic Importance of Local Environment
Strategic Leader
Implementer
Low Low
Contributor
High Level of Local Resources and Capabilities
REF:MANAGING ACROSS BORDERS THE TRANSITIONAL SOLUTION BY Christopher Bartlett & Sumantra Ghoshal
Companies must redefine their cores
New economic model
Frontal assault on the core Replace or restructure the core
Historic economic model
Shift to new boundaries
Core business definition
Ref: “Profit from the core”, by Chris Zook and James Allen of Bain & Co.
New business definition
The Attribute Map Defined Products and Services
Customer Attitude Attribute of Product or Service, Relative to Competing Offering Basic Positive Nonnegotiable
Performance at least as well as competition
Discriminator Differentiator
Performance better than competition where it counts
Energizer Exciter
Performance better than competitors
Negative
Tolerable
Performance no worse than competitors
Dissatisfier
Performance below the level of competitors
Enrager
Must be corrected at any cost (to capitalize on competitors’ negatives)
Neutral
So what?
Dose not affect the purchasing decision in a meaningful way
Parallel
Influences segment attitudes but is not directly related to product or service performance
Ref: THE ENTREPRENUURIAL MINDSET, Rita Gunther McGrath, Ian MacMillan
Hierarchy of Competencies: What Consumers Are Really Saying About How They Want to Interact with Companies?
Attributes
LEVEL
III.Consumer Seeks the Company (Dominate)
ACCESS
Give me a solution; help me out in a bind
EXPERIENCE
Establish intimacy with me by doing something no one else can. Care about my needs and me.
PRICE
Be my agent; let me trust you to make my purchases
PRODUCT
Inspire me with an assortment or great products I didn’t know about. Be dependable in your selection and in stock position, so I can rely on you when I’m in a bind. Be credible in your product and service offerings.
SERVICE
Customize the product or service to fit my needs.
II.Consumer Prefers the Company (Differentiate)
Make the interaction convenient for me.
Be fair and consistent in your pricing. I’m not necessarily after the lowest price. Keep the prices honest; don’t jack them up or offer big savings when there are none. Be inconsistent, unclear, or misleading in your pricing.
Educate me when I encounter a product or a situation I don’t understand. Accommodate me; bend over backward sometimes to show me you care. Give me an experience I’d just as soon forget; give me a reason to tell my friends and relatives to stay away.
I.Consumer Accepts the Company (Operate at Par)
Make it easy for me to find what I need, get in and out in a hurry.
Respect me; treat me like a human being.
Consumer Underworld
Block my way, hassle me, keep me waiting, make it hard for me to get in and out.
Dehumanize me; disrespect me; ignore my needs
Offer me poor quality merchandise and services that I can’t use.
Ref: They Myth of Excellence; Fred Crawford & Ryan Mathews
Strategic Marketing Process
Market Situation Analysis
Analyzing markets Market segmentation Analyzing competition Marketing information systems and research
Implementing and managing marketing strategy
Designing effective organizations Marketing strategy implementation and control
Designing marketing strategy
Market targeting and positioning strategy Marketing strategies for selected situations Planning for new products
Marketing program development
Product portfolio strategy Distribution Strategy Pricing strategy Promotion strategy
Philip Kotler, Marketing Management
Competitive-strengths matrix (1 of 2)
Rate the competitor in each of the six areas using the following
5 excellent/superior 4 very strong/competitive 3 adequate/average 2 weak/uncompetitive 1 very weak
Area
Product Manufacturing
Scale
1
2
3
4
5
Sales and Marketing Finance
Management
Corporate culture
Competitive-Strengths matrix
Competitive Strategy Offensive Flanking X
(2 of 2)
Position Leader Strong Contender Weak Contender Small Fry
Defensive X
Guerilla
X
X
X X
REF: RIES & TROUT, " MARKETING WARFARE "
All industries experience life cycle.The life cycle may conveniently be divided into stages.The rules of the game (key success factors) and competitor strategy change from stage to stage (1 of 3)
Embryonic Growth Maturity Aging
Unit Demand
Maturity
(2 of 3)
Characteristics
Introduction
Low Sales High cost per customer Negative Innovators Few
Growth
Rapidly rising sales Average cost per customer Rising profits Early adopters Growing number
Maturity
Peak sales Low cost per customer High Profits Middle Majority Stable number starting to decline Maximize profit while defending market share
Decline
Declining sales Low cost per customer Declining Profits Laggards Declining number Reduce expenditures and milk the brand
Sales Costs Profits Customers Competitors Marketing Objectives
Create Product awareness and trial
Maximize market share
Strategies Product Price
Distribution Advertising Sales Promotion
Offer a basic product
Use cost plus Build selective distribution Product awareness to adopters/dealers Heavy promotion to entice trial
Product extensions,service, warranty Price to penetrate market Build intensive distribution Awareness/interest in the mass market Reduce to profit from heavy demand
Diversify brands and models Phase out weak items Price to match or best Cut price competitors Build more intensive Go selective;phase out weak outlets distribution Stress brand differences Reduce to needed to and benefits retain hardcore loyals Increase to encourage Reduce to minimum brand switching
Situation Analysis
(3 of 3)
The Strategic condition of a business is described by the combination of its competitive position and the maturity of its industry.Strategic condition determines the number of choices available to competitors.
Maturity Stage
Embryonic Growth Mature Aging
Leading
Strong
Competitive Position
Favorable Tenable Weak
Westney & Goshal, Sloan Working Paper, 1988
Synchronized Supply Chain
Business to Business
Configuration
Joint Capacity Investments Planning Collaborative Supply Chain Planning Execution EDI Web Order Entry Web Procurement
Business to Consumers Business to Business
Business to Business
Web Data Feeds From Suppliers, Customers
Buy
Make
Move
Sell
Ref: Dr. Masud Arjmand and Stuart Roach. Accenture
THE VALUE NET
CUSTOMERS
COMPETITORS
COMPANY
COMPLEMENTORS
SUPPLIERS
Ref: Co-opetition: Adam M.Brandenburger & Barry J.Nalebuff
Four Stages of Supply Chain Optimization
INTERNAL Sourcing & Internal Logistics I Excellence II
Driver
Benefits
EXTERNAL Network Industry Construction III Leadership IV
Business unit leaders
Best partner performance
VP Sourcing CIO/supply (under pressure) chain leader
Leveraged savings Inventory, logistics, freight, order fulfillment Teaming, functional excellence Prioritized improvements across network Process redesign, systems improvement Benchmarks, best practice, activity - based costing Expanded levels
Management team
Network advantage, profitable revenue
Focus
Forecasting, planning, Consumer network customer services, inter-enterprise Metrics, database, mining, electronic commerce Intranet, Internet, Virtual Information system Full Enterprise Demand-supply linkage Global Market Joint Venture Network processing
Tools
Action Midlevel Total organization Area organization Guidance Cost data, Process mapping Advanced cost success funding models, differentiating processes Model None Supply-chain Inter-enterprise intra-enterprise Alliances Supplier Consolidation Training Team Best Partner Leadership Formal Alliance Partnering
Ref. : Charles C. Poirier, “ Advanced Supply Chain Management,”Berrett-Koehler Publishers,Inc,California
MARKET ATTRACTIVENESS VS BUSINESS STRENGTH
MARKET ATTRACTIVENESS
High Medium Low Build Selectively Limited Expansion Divest
Invest to High Protect Build BUSINESS Selectively Build Medium Selectively Manage for Earnings STRENGTH Manage for Low Protect & Refocus Earnings
McKinsey & GE
Planning Schools of Thought
Design School Theme
“Capture Success” Strategic planning is a conceptual process Invention of strategy by senior managers
“Selection based “Analysis will provide synthesis” on calculation”
Strategic Planning is a formal process Molding of strategy through policies and methodologies Strategic planning is an analytical process Selection of generic strategic positions •Provides centralized assessment of core competencies
Planning School
Positioning School
“Learn over time”
Learning School
“Bargain and negotiate” Strategic planning is a power process
Political School
Core Belief
Strategic planning is an emergent process
Behavior
Refining and Negotiating reconciling strategy through strategy through power and past experiences politics •Adaptive to changing organizational needs •Promotes needed change blocked by established forms of influence •Direction may be driven by parochial interest rather than common interest
Primary Strength
•Provides top management vision of strategic direction
•Complexities may not be easily conceptualized atop the organizational hierarchy
•Provides structure, promotes the activity of strategic planning
•Can become dysfunctionally complex
Primary Weakness
•Can become too •May promote strategic narrowly drift,requires focused significant resources to implement
SEGARS AND GROVER , Strategic Information Systems Planning Information Systems ResearchVol. 10,No. 3,September 1999
Positioning for Emerging-Market Companies
Competitive Assets Customized to home market Transferable abroad Dodger Contender
Pressures to Globalize in the Industry
High
Focuses on a locally oriented link in the value chain, enters a joint venture, or sells out to a multinational Defender
Focuses on upgrading capabilities and resources to match multinationals globally, often by keeping to niche markets Extender Focuses on expanding into markets similar to those of the home base,using competencies developedd at home.
Low
Focuses on leveraging local assets in market segments where multinationals are weak
.
Ref: Dawar And Frost
The E-business Value Transformation Matrix
Product And Market Transformation Reconceive the product/service
Business Process Transformation
Unbundle and outsource processes
Industry Transformation
Redefine the basis of competition
Redefine the value proposition
Assume another role - E-business storefront - Infomediary - Trust intermediary - E-business enabler - Infrastructure provider
Compress the value delivery system Explode the price/performance ratio
Become the channel enabler
Move the product up the food chain Separate the function from the form
Redraw industry boundaries Break the unbreakable rules
Ref: “Net Ready” – AMIR HARTMAN & JOHN SIFONIS With JOHN KADOR
PRODUCT HIERARCHY FOOD CHAIN
Transformative experience
Experience Value-Added Services
Product with Differential Attributes
Commodity
Ref: “Net Ready” – AMIR HARTMAN & JOHN SIFONIS With JOHN KADOR
Key Features of B-Web Types
Agora Aggregation Selection and convenience Optimization of selection, organization, price, convenience, matching, and fulfillment Buyer Value Chain Process integration Design and delivery of an integrated product or service that meets a specific set of customer needs Value driver Alliance Creativity
Main theme
Dynamic pricing Liquidity converting goods into a desirable price
Distributive Network Allocation/ distribution Facilitate the exchange and delivery of information, goods, and services Sender/ recipient Network optimization Visibility and transparency Distribution
Value proposition
Creative collaboration in aid of a goal shared across a community of contributors
Customer role Knowledge focus
Market player
Timing Market intelligence
Contributor
Key process Examples
Price discovery Yahoo classifieds eBay Priceline AdAuction NASDAQ MetalSite FreeM rkets
Market segmentation Supplier offerings Fulfillment Needs matching Amazon.com Chemdex HomeAdvisor Webvan E*Trade Travelocity WSJI
Innovation Supply -chain management
Community Creativity Standards and roles Innovation
Product design Supply -chain management Cisco Systems Dell Computer General Motors Celestica Bidcom
America Online NetNoir Linux MP3 Wintel
Enron UPS AT&T Wells Fargo Internet
Ref: Tapscott, Ticoll, and Lowy
MODEL OF EC CONSUMER BEHAVIOR
Individual Characteristics Environment Characteristics Social, family, communities
Age, gender, ethnicity, education, lifestyle, psychology, knowledge, values, personality
Stimuli
Marketing Price Product Others
Economical Political Cultural
Buyer’s Decisions
Buy or not What to buy
Promotion Technological
Quality
DecisionMaking Process
Where to buy (vendor) When to buy How much to spend Repeat purchases
Vendors’ Controlled Systems
Logistics support Payments, Delivery Technical support Web design, intelligent agents Customer service FAQs, e-mail, call centers, one-toone
Leverage metrics to:
1. Combine the seemingly incompatible 2. Benchmark what exemplar organizations are doing
3. Kill sacred cows
4. Ensure rigor 5. Step out of your time box; think holistically 6. Take your strategy to extremes
7. Communicate market your ideas
8. Manage change
PRESENTATION ON METHOD
SELECT A METHOD/METRIC (CLASS NOTES) NOT PREVIOUSLY COVERED
PRESENTATION SHOULD BE APPROXIMATELY 15 MINUTES, WITH 3 CHARTS: 1. THE METRIC 2. APPLY TO AIR PRODUCTS 3. APPLY TO KODAK YOU ARE THE INSTRUCTOR; PROVIDE LECTURE NOTES FOCUS ON: WHY THE ORGANIZATION FALLS INTO A CATEGORY IN THE METRIC IMPLICATIONS (“SO WHAT”) HOW CAN THE ORGANIZATION DO BETTER DO NOT SPEND TOO MUCH TIME ON DEFINITIONS; APPLY THE MODEL;
REVIEW YOUR SELECTION WITH ME EARLY; A PARTICULAR METHOD WILL BE COVERED ONLY ONCE (FIRST COME FIRST SERVED) ALL CASES AND RESEARCH PROJECT SHOULD APPLY APPLICABLE METHODS PRESENTED BY CLASS
Who’s Under The Microscope
Aberdeen Group 450 mid market companies
AMR Research 400 companies of various sizes annually Forrester Research 1,000 IT decision makers
semiannually
Gartner Varying number of companies annually plus regular
conference polls
Meta Group 400 large global companies annually, with spot
surveys of 5,000 IT managers throughout the year
Morgan Stanley 300 large companies monthly
Professor Luftman will cover, so do not select for presentation.
ANSOFF’S PRODUCT / MARKET EXPANSION GRID
( The Original Product / Market Matrix ) Current Products 1 New Products 3 Product development strategy 4 Diversification strategy
Market penetration strategy
2
Market development strategy
Ref: The Conference Board, Books
THE FIVE COMPETITIVE FORCES THAT DETERMINE INDUSTRY PROFITABILITY
POTENTIAL ENTRANTS
THREAT OF NEW ENTRANTS
BARGAINING POWER OF SUPPLIERS
INDUSTRY COMPETITORS
BARGAINING POWER OF BUYERS
SUPPLIERS
RIVALRY AMONG EXISTING FIRMS THREAT OF SUBSTITUTE PRODUCTS OF SERVICES
BUYERS
SUBSTITUTES
Porter
THE FIVE COMPETITIVE FORCES THAT DETERMINE INDUSTRY PROFITABILITY
Political & Legal Environment Complementors
POTENTIAL ENTRANTS
THREAT OF NEW ENTRANTS BARGAINING POWER OF SUPPLIERS INDUSTRY COMPETITORS BARGAINING POWER OF BUYERS
Technical Environment
SUPPLIERS
RIVALRY AMONG EXISTING FIRMS THREAT OF SUBSTITUTE PRODUCTS OF SERVICES
BUYERS
SUBSTITUTES
Demographic Environment
Social Environment
Macroeconomic Environment
COMMUNICATIONS
•Understanding of Business by IT •Understanding of IT by Business •Inter/Intra - organizational Learning/Education •Protocol Rigidity •Knowledge Sharing •Liaison( s) effectiveness
COMPETENCY/VALUE MEASUREMENTS
•IT Metrics •Business Metrics •Balanced Metrics •Service Level Agreements •Benchmarking •Formal Assessments/Reviews •Continuous Improvement
GOVERNANCE
•Business Strategic Planning •IT Strategic Planning • Organization Structure Reporting/ •Budgetary Control •IT Investment Management •Steering Committee(s) •Prioritization Process
·
IT BUSINESS ALIGNMENT MATURITY CRITERIA
SKILLS
•Innovation, Entrepreneurship •Cultural Locus of Power •Management Style •Change Readiness •Career cro ssover training •Social, Political, Education, Cross - Trusting Interpersonal Environment •Hiring and retaining
PARTNERSHIP
· · · · · · •Business Perception of IT Value •Role of IT in Strategic c Business Planning •Shared Goals, Risk, Rewards/Penalties •IT Program Management •Relationship/Trust Style •Business Sponsor/Champion
SCOPE & ARCHITECTURE
•Traditional, Enabler/Driver, External •Standards Articulation •Architectural Integration: - - Functional Organization -Enterprise -Inter - Inter - enterprise •Architectural Transparency, Agility, Flexibility •Manage Emerging Tech.
Strategic Alignment Maturity Summary
Level 3
Level 5
•Optimized process •COMMUNICATIONS: Informal, pervasive •COMPETENCY/VALUE: Extended to external partners •GOVERNANCE: Integrated across the org & partners •PARTNERSHIP: IT-business co-adaptive/improvisational •SCOPE & ARCHITECTURE: Evolve with partners •SKILLS: Education/careers/rewards across the organization
Level 4
•Improved/ managed process
•COMMUNICATIONS: Bonding, unified •COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed •GOVERNANCE: Managed across the organization •PARTNERSHIP: IT enables/drives business strategy •SCOPE & ARCHITECTURE: Integrated with partners •SKILLS: Shared risk & rewards •Established focused process
•COMMUNICATIONS: Good understanding; Emerging relaxed •COMPETENCY/VALUE: Some cost effectiveness; Dashboard established •GOVERNANCE: Relevant process across the organization •PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative •SCOPE & ARCHITECTURE: Integrated across the organization •SKILLS: Emerging value service provider;Balanced tech & business hiring Level 2 •Committed process
Level 1
•COMMUNICATIONS: Limited business/IT understanding •COMPETENCY/VALUE: Functional cost efficiency •GOVERNANCE: Tactical at Functional level,occasional responsive •PARTNERSHIP: IT emerging as an asset; Process enabler •SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS) •SKILLS: Differs across functional organizations
•Initial/Ad-Hoc process •COMMUNICATIONS: Business/IT lack understanding •COMPETENCY/VALUE: Some technical measurements •GOVERNANCE: No formal process,cost center, reactive priorities •PARTNERSHIP: Conflict; IT a cost of doing business •SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email) •SKILLS: IT takes risk, little reward; Technical training
Framework For Assessment Strategic Importance of an IT System
HIGH FACTORY DEPENDENCE UPON EXISTING SYSTEMS SUPPORT LOW LOW IMPACT OF SYSTEM HIGH TURNAROUND STRATEGIC
Source: F.Warren McFarlan and James Cash
Classification of Global Strategies
High
Global Integration
Multinational Strategy
Transnational or Metanational Strategy
Global Exporter Strategy Low Low
Multi Local Strategy High
Local/National Responsiveness
Software Engineering Process Technologies Adoption Grid
High
Niche technology Ease of individual organizatio n adoption Experimental Slow mover
Dominant standard
Low
Low
C.Kemerer, CISR, 6/92
Ease of community adoption (standards perspective)
High
Budgeting System for Controlling Functions
Outputs
Inputs
Outputs minus Inputs
REVENUE CENTERS
EXPENSE CENTERS
PROFIT CENTERS
INVESTMENT CENTERS
Outputs Compared with Assets
Aligning Measurements to Strategy
What is my vision of the future?
Statement of Vision 1.Definition of SBU 2.Mission of Statement 3.Vision Statement
To my stake holders
To my customers
If my vision succeeds How will I differ?
With my Internal Management Processes Internal Perspective
With my ability to innovate and grow
Financial Perspective
Customer Perspective
Innovation and learning
What are the critical Success Factors?
What are the Critical Measurements?
The Balanced scorecard
Kaplan & Norton
Total Value Management Framework
IT Enabler:
Business Process:
Business Outcome:
Portfolio Management Options
Organization Change Process
Source: Belasco, “Teaching the Elephant to Dance”, Crown Publisher NY.
THE GENERIC VALUE CHAIN
FIRM INFRASTRUCTURE
SUPPORT ACTIVITIES
HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT
SERVICE
INBOUND OPERATIONS OUTBOUND MARKETING LOGISTICS LOGISTICS & SALES
PRIMARY ACTIVITIES
Porter
STRATEGY FORMULATION
VISION (WHERE)
(BHAGS)
ANALYSIS
STRATEGY (HOW)
PROJECT IMPLEMENTATION
MEASUREMENTS MISSION (WHAT)
t
LUFTMAN
The BCG Matrix
Market Share High Low Question Marks
Anticipated Growth Rate
Stars
High
Cash Cows
Low
Dogs
MISSION STATEMENTS
Who are we? What do we intend to be? What do we stand for? What do we do for the world? What makes us attractive to each important stakeholder? Why should they support us? What is our long-term unalterable focus, intended area of preeminence? What makes us exciting? What makes this enterprise different? What is it best at? How does it provide unique value to customers and community? How will we provide challenge to our people? How will we extend and grow? What are our key technologies? Intellectual skills? Concepts of customer service? How will we define success? How will we measure it?
An organizations mission is its purpose, or reason for existence.
Mission
A Mission statement for information systems is a concise statement of what business the group is in. It is a statement of why the Information Systems group exists, what purpose and function it provides for the company. You can also look at the company mission for ideas or themes for the information systems mission. Following are examples of information systems mission statements developed at different companies. An organizations mission is its purpose, or reason for existence.
IT Mission Example -1 of 5
The mission of Information Systems, in partnership with the business units, is to facilitate the availability of timely and accurate information needed to manage the day-to-day and strategic direction of the company by the deployment of systems and tools. This information will assist the company in achieving its objectives and becoming one of the top-ten in the marketplace.
IT Mission Example -2 of 5
The mission of Information Systems in partnership with the business community is to develop, implement, and maintain worldwide business system solutions that provide secure collection, storage, and access to information. We will accomplish this by matching the business requirements with the appropriate technology.
Mission Example - 3 of 5
The mission of Information Systems is to develop, implement, and maintain high-quality efficient and effective business systems that provide the information needed to support the daily operation and strategic business direction of the business at a level superior to the competition with customer satisfaction as the end goal.
Mission Example - 4 of 5
Our mission is to facilitate improvements in operating efficiency and effectiveness by delivering worldwide integrated business systems and services. The business strategies will drive our efforts to ensure that our contributions provide the highest value to the corporation.
Mission Example - 5 of 5
The mission of the Information Systems organization is to provide timely, cost-effective, high-quality information systems and services that meet or exceed our customer’s requirements for achieving business goals and objectives.
Vision
A Vision is a concise measurable statement of where you want to go, what you aspire to be. Develop this by looking at the company’s vision statement and objectives and identifying how Information Systems can assist the company.
Characteristics of an Effective Vision
Imaginable : Conveys a picture if what the future will look like
Desirable : Appears to the long-term interests of employees, customers, stockholders, and others who have a stake in the enterprise Feasible : Comprises realistic, attainable goals Focused : Is clear enough to provide guidance in decision making Flexible : Is general enough to allow individual initiative and alternative responses in light of changing conditions Communicable : Is easy to communicate; can be successfully explained within five minutes
Elements of an Effective Strategic Vision
A good strategic vision should include:
• A statement of what the organization wants to be and how it will get there • Concentrate goals and milestones (financial and otherwise) • Core capabilities that need to be developed • A description of how to change the organization • A proposed market and product scope supporting the vision • Robustness in the face of multiple scenarios • Stretch to reach beyond the organization’s current grasp • Passion, in order to galvanize the organization • Simplicity and clarity of purpose
Ref. Profiting from Uncertainty - Paul J. H. Schoemaker
Vision Example - 1 of 5
Vision:
• Anyone can get any information (site, geographic area or global level) at any time, any where, any way, given the proper security constraints. • The end-user does not have to know the location of the data. • Maintain data in only one master place within the organization. • Implement systems to enhance end-user productivity. • Systems are able to support competitive business demands with immediate response to quickly changing business needs. • Information Systems adds a competitive edge to the company’s product line.
Vision Example - 2 of 5
Vision : We seek to be an integral partner in the achievement of the company’s vision and mission through the appropriate application of Information Technology to business needs.
Vision Example - 3 of 5
We will have Business Systems that: Take advantage of global “sameness” • Are purchased whenever practical • Have integrated data that is entered only once • Provide consistent definitions of information • Support functional and cross-functional business processes • Deliver the right information, at the right place, at the right time, in the right format • Are flexible enough to support changing environments • Can be accessed by office, home, and mobile workers • Provide capabilities to external customers and suppliers
Vision Example - 4 of 5
The strategic role of Information Systems is to be:
• A provider of information technology, which means assessment and acquisition of new technology which will assure that company use of information systems and applications provide strategic advantage in our business markets. • A provider of information services, the infrastructure, and environment that assures company-wide information sharing that meets customer requirements. • A strategic business partner of the business units to provide timely and cost-effective information systems solutions to business needs • A proactive agent of change, providing management and staff with decision making, quality information through automated and integrated information systems and processes.
Vision Example - 5 of 5
Vision of Information Systems : • Have delighted customers (users) • Proactively address business needs • Provide competitive advantage to the company • Be recognized in the industry as a world-class Information Systems organization. • Have Information Systems employees with a passion and commitment, people that carry the fire and love their job • Provide enterprise-wide business solutions. • Have a superior functioning team. • Simplify standardize,automate, and integrate.
Strategic Objectives
Strategic objectives state how you are going to achieve the vision and mission. Following are examples of objectives from different companies.
Strategic Objectives Example - 1 of 6
Information Systems Objectives :
Implement solutions in partnership with the business units. Champion each project ( business-requested project, not infrastructure projects) by business management to ensure that business issues drive technical solutions.
Contd...
Align Information Systems projects and priorities with business priorities and direction. Likewise, the strategic direction of the company will determine the strategic direction of Information Systems. Provide responsiveness and flexibility to address changing business requirements rather than simply utilizing technology. Meet External customer requirements and assist in solving our customers’ business issues. Maximize productivity and reduce costs throughout the business Provide Real information for business decisions (as opposed to endless amounts of data). Information must be available anytime(24 hour access), anywhere in the world, in any way (flexible formats), for any one (with security). Support worldwide information requirements and business objectives.
Contd...
Minimize Information Systems investments through the use of standardized hardware and packaged software, whenever possible. This will minimize support requirements and provide for maximum growth and flexibility to take advantage of the future industry developments. Minimize risk to the company by utilization of proven, yet not out-of-date, technology. Educate the users and maximize their ability , through tools and training, to get information without dependence on Information Systems and utilize new capabilities and leading technology in providing a competitive advantage for the business Balance Information Systems resources and expenditures with the business demands and the return on investment ( ROI ) to the business
Information Systems Strategies 2 of 6
• Drive growth by enabling superior consumer insight, streamlining revenue producing activities, providing value added customer services and increasing collective innovation • Accelerate productivity by eliminating people, paper and time from business processes and providing people with unique insights into their activities and decision processes • Enable organizational excellence by providing people with instantaneous, relevant, integrated information and knowledge any time and any place in the world • Provide an information technology infrastructure which is reliable, secure and responsive at top 10% cost efficiency levels
• Develop an integrated, information systems plan to support global food business and deploy solutions which enable global business processes
Strategic Objectives Example - 3 of 6
Information Systems Objectives: Information Systems will provide support, guidance, and advice to all areas of the business. The assistance will include the application and use of technology, in addition to suggestions on business process improvements. Provide continued support after the project implementation to ensure you meet the business needs. Design Systems for ease of use to maximize the business productivity. We will provide superior communication to ensure information sharing throughout the organization regarding technology and computing. We will understand the business and communicate in a language that is understandable. All areas of business will know who to call for assistance. We will treat our technology users like customers and serve them with a positive attitude.
Contd...
Strategic Objectives Example - 4 of 6
Information Systems Objectives:
• Implement high-quality business solutions with a focus on customer satisfaction. • Develop systems that support the growth and profitability goals of the company. • Assist the company in improving its strategic position in the marketplace. • Support the business by improving efficiency, productivity, information flow, and information access. • Provide tools which will allow employees to make better and more timely business decisions. • Reduce overhead Costs.
Strategic Objectives Example - 5 of 6
Information Systems Objectives:
• Support corporate objectives and goals by providing information management technologies, systems, and services that meet business requirements. • Communicate and execute the Information Systems Organization vision and strategic plan. • Effectively and efficiently provide and manage the companywide information systems infrastructure. • Team and collaborate with the business units to fulfill their information sharing needs.
Strategic Objectives Example - 6 of 6
We will strive for the following Long-term objectives in all systems:
Flexibility Performance Availability Managed Cost Managed Risk Viability Manageability Support-ability Scale-ability Interoperability Reduced Complexity Single System Image Extensibility
DECISION PROCESS FLOW
How do I __________? The issue is important because__________.
What have I done to date? What do I want the group to do?
Clarifying questions Issue restatement How do I __________?
Suggestions
Specific next steps, due date, risks
1
Obtain Sponsor/ Champion Gap Analysis
Strategic Alignment Maturity
7 3a
Implementation Plan “To-Be” “To-Be” State of State of The The Organization Organization Periodic Review
3 5
8
2
Form The Team “As-Is” “As-Is” State of State of The The Organization Organization
Strategy Alternatives Analysis
Measurement Criteria
4
SWOT Analysis
5
Porter Industry Profitability Analysis
6
Ansoff ProductMarket Analysis Strategy Alternatives
Environmental Environmental Turbulence Turbulence
The Strategy Management Process
3.
Assess the organization
1.
Define the organization’s mission
2.
Establish objectives
5.
Identify opportunities and threats
6.
Develop and evaluate alternative strategies
7.
Select Strategy
8.
Implement strategy
Assess the environment
4.
Integrated TAM/TTF model.
Attitude Towards Use Intention to use Tool Actual Tool Use
Perceived Ease of Use
Perceived Usefulness
TAM - Technology Acceptance Model
Reference: Davis & MISQ 1989
Tool Experience
Task Technology Fit
TTF - Task Technology Fit
Reference: D. Goushned, R. Thompson, MISQ, 1995
Tool Functionality
Task Characteristics
Methods for class
presentation begin here!
Always
Consider
Benchmarking Process Steps
1. Identify What is to be Benchmarked
Planning
2. Identify Comparative Companies 3. Determine Data Collection Method and Collect Data 4. Determine current Performance “Gap”
Analysis
5. Project Future Performance Levels
Integration
6. Communicate Benchmark Findings and Gain Acceptance
7. Establish Functional Goals 8. Develop Action Plans
Action
9. Implement Specific Actions and Monitor Progress 10. Recalibrate Benchmarks
Maturity
11. Leadership Position Attained & Practices Fully Integrated into Process
Source:Robert C. Camp books & www.apqc.org
Continuous Benchmarking Method
Deliver
Define
Finance
Business Improvement Process
Measure
Contract Invest
Prioritize & Strategize
Investment Evaluation Methodologies
Source: Dataquest/Gartner
BENCHMARKING / KIVIAT 1 OF 2
XYZ Software Process Assessment • 64 XYZ projects compared to SPR “Top 10” (Data provided by Capers Jones)
Physical Env. Metrics
3 2.5 2 1.5 1 0.5 0
Customer Focus Project Mang
• Scale: 1-2 = Leading Edge 3 = Industry Norm Methodologies 4-5 = High Risk
64 XYZ Projects
Project Team Variables
Tools
Quality Focus
SPR "Top 10"
BENCHMARKING / KIVIAT 2 OF 2
Leadership
4.1
Traditional Retailer • Brick and mortar focus • Annual revenue of + $500 M
2.6
3.1
Technology
3.7
• Understand the importance of eBusiness, but have yet to
4.1 2.6
Governance/ Operating Model
develop a plan of attack Best of Breed
• Companies incorporating
3.0 4.0
eBusiness best practices
Organizational Competencies
Ref : Cisco Systems
STRATEGY, VISION MISSION
Generic Competitive Strategies (1 of 2)
Low Cost Make product available at lower cost than competition Make product different from competitors Make product for specific market management Make product that is totally new Join competitors or others to offer something profitable
Differentiation
Niche Marketing
New Business
Alliance
Porter, Treacy, Oster
Major Options in Securing Generic Competitive Strategies (2of 2)
Suppliers Differentiation Customers Competitors New Entrants Substitutes
Low Cost
Niche New Business
Alliances
Porter, Treacy
Strategic Process Theme Diagram
STRATEGY
Strategy Formulating Strategy Strategy
ORGANIZATION
Strategy formation
Structure and Systems Culture and Power
The Entrepreneurial Concept The Mature Context The Diversified Context The Innovative Context The International Context The Context of Change
Source: Henry Mintzberg, James Brian Quinn & Sumatra Ghoshal
CONCEPTS
CONTEXTS
Dynamics of the self- aligning organization
•Create a shared strategic vision for the organization •Develop a deployment plan to translate the strategic plan into action •Identify critical success factors •Identify key strategic work processes •Align all organizational work with strategic vision •Design an ongoing process for systematic review •Measure and monitor results •Identify critical “strategic” customers •Identify customer delight factors •Create the organizational capability and infrastructure to continuously gather “actionable” customer data and use it to drive process improvement and design •Measure and monitor results
Strategy
•Identify core processes •Redesign key processes •Continuously improve processes •Measure and monitor results
•Align culture with strategic vision •Communicate strategy
Process
Culture Leadership
•Train for leadership in rapidly changing environment •Measure and monitor results
Customer
•Identify corporate and individual competencies necessary to achieve the strategic vision •Identify current competency levels •Design and employ plans to “close gaps”
Source: Labovitz, Rosansky 1997
People
•Design and align reward and recognition systems with organizational goals and desired competencies •Measure and monitor results
Type of Competitive Advantage Being Pursued
Lower Cost Differentiation
A Broad Cross-Section of Buyers
Overall Low Cost Leadership Strategy
Broad Differentiation Strategy Best-Cost Provider Strategy Focused Differentiation Strategy
A Narrow Buyer Segment
Focused Low-Cost Strategy
Source: Strickland & Thompson, Strategic Management 11th Edition, 1999, pp. 136
Strategic Orientation Modes
Follow
Interact
Isolate
Shape
Low
High
Innovation Orientation
Ref : Pierre Berthon, James M Hulbert, Leyland F.Pitt, California Management Review Vol 42 , No. 1 Fall 99
How to Respond to Disruptive Strategic Innovation
H
• Focus on your own business or • Ignore the innovation (its is not your business)
• Adopt and separate or • Adopt and keep internal or • Attack back and disrupt the disruption
Ability to Respond
• Focus on your own business
• Attack back and disrupt the disruption or
• Embrace the innovation and scale it up
L
H
Motivation to Respond
Ref: “Shifting Cultural Gears in Technology – Driven Industries” by Paul J.Kampas; MIT Sloan Management Review, Winter 2003 Vol.44.No.2
Three Approaches to Strategy
Build and Depend
Strategic logic Strategic steps Establish position Identify an attractive market Locate a defensible position Fortify and defend
(1 of 2)
Nurture and Leverage Unique
Leverage resources Establish a vision Build resources Leverage across markets
Flexibly pursue via Simple Rule
Pursue opportunities Jump into the confusion Keep moving Seize opportunities Finish strong How should we proceed? Key processes and unique simple rules Rapidly changing, ambiguous markets Unpredictable Managers will be too tentative in executing on promising opportunities Growth
Strategic question
Source of advantage
Where should we be?
Unique, valuable position with tightly integrated activity system Slowly changing, wellstructured markets Sustained It will be too difficult to alter position as conditions change Profitability
What should we be?
Unique, valuable, inimitable resources Moderately changing, well-structured markets Sustained Company will be too slow to build new resources as conditions change Long-term dominance
Works best in Duration of advantage Risk
Performance goal
Ref: Eisenhardt & Sull,HBR
Simple Rules (2 of 2)
Type How To rules Boundary rules Priority rules Timing rules Exit rules
Ref: Eisenhaldt & Sull,HBR
Purpose
They spell out key features of how a process is executed: “What makes our process unique?”
They focus managers on which opportunities can be pursued and which are outside the pale They help managers rank the accepted opportunities They synchronize managers with the pace of emerging opportunities and other parts of the company They help managers decide when to pull out of yesterday’s opportunities
BUSINESS PLANNING MODEL
Characteristics Motive for decisions Goals of organization Evaluation of proposals Choices made by Decision horizon Preferred environment Decision links Flexibility of mode Size of moves Vision of direction Condition for Use Source of power Objectives of organization Organizational environment Status of organization Entrepreneurial Mode Proactive Growth Judgmental Entrepreneur Long term Uncertainty Loosely coupled Flexible Bold decisions General Adaptive Mode Reactive Indeterminate Judgmental Bargaining Short term Certainty Disjointed Adaptive Incremental steps None Planning Mode Proactive and reactive Efficiency and growth Analytical Management Long term Risk Integrated Constrained Global strategies Specific
Entrepreneur Operational Yielding Young,small, or strong leadership
Divided Non-operational Complex, dynamic Established
Management Operational Predictable, stable Large
Implied planning styles
Top-down
Bottom-up
Top-down/bottom-up
Adapted from Mintzberg (1973, p. 49) California Management Review, vol.16, no.2.
External Business Strategy Model
Strategic Typology Focus Environment Entrepreneurial problem Product/market Today Stable Niche positioning Narrow segment Defender Prospector Tomorrow Dynamic Innovation New product and markets Flexibility Multiple/prototype Decentralized Analyzer Today and tomorrow Balanced Dual focus Market penetration, product and market development Flexibility and stability Dual Distributed/linked Reactor Yesterday Unstable Survival Inconsistent
Engineering problem Technology
Efficient production/ distribution of services Single core Centralized
Cost minimization Mixed Ad hoc
Administrative problem Emphasis Orientation for top management Planning
Implied planning styles
Strict control
Mechanistic Production and control
Facilitate
Organic Marketing and R&D
Differentiate structure and process Matrix organization Key functional areas and product lines Intensive planning
Weak links
None Semiautonomous groups Loose
Formal/hierarchical
Bottom-up
Low formalization
Inside-out
Top-down / Bottom-up
None
Ref: Compiled from material in Miles and Snow (1978)
FOUR APPROACHES TO INNOVATION
INNOVATION STRATEGY Recruiting and Retaining Superior Human Capital UPSIDES • Better control of IP • Long-term growth focus • Difficult for competitors to imitate • Internationalization of skills and capabilities • Full capture of returns DOWNSIDES • Organic growth is slower • Challenge of identifying and valuing superior human capital • Full risk exposure • Long time horizon • Uncertain returns SOME EXEMPLAR COMPANIES • Goldman Sachs • Google • Merck • Research In Motion • Southwest Airlines • W.L. Gore • Apple • BMW • Hewlett-Packard REQUIREMENTS • Astute strategic human resource management • Organizational flexibility
Internal R&D Spending
• Culture of risk tolerance • Organizational flexibility • Long-term commitment
Strategic Alliances
• Shared risk • Multiple, smallscale investments provide strategic options • Faster than internal development
• Faster than growing organically • Acquire innovative technologies become competitors
• Potential loss of IP controls • Challenge of alignment of goals • Shared returns
• IBM • Eli Lilly • Oracle • Procter & Gamble
• Dedicated function for the management of partnerships
Acquisitions
• Risk of overpaying • Cultural integration concerns • Involves relying on others for innovation
• Cisco • General Electric • Pfizer • Microsoft
• Capability to identify and assimilate acquisition targets
SOURCE – Rothaermel & Hess, MIT SLOAN MANAGEMENT REVIEW, Spring 2010.
Top - Down Planning with Bottom - up Implementation (BSP)
Business Mission
Business Objectives Business Functions Top - down Planning Business Processes Bottom - up Implementation Computer Applications Computer Databases
Business Data
Information Systems Architecture
FIVE ARCHITECTURAL VIEWS
Business View
Work View
Application View
Information View
Technology View
Source : “Paradigm Shift” by Tapscott & Caston
Dick Nolan: Six stages of data processing growth
Growth process
Applications Portfolio Functional cost reduction application Specializatio n for technological learning Lax “Hands off” Proliferation Upgrade documentation and restructuring of existing applications Middle management Retrofitting existing applications using data base technology Establish computer utility and user account teams Tailored planning and control systems Accountability learning Organization integration of applications
1 OF 2
Application integration “mirroring” information flows Data resource Management
DP organization
User oriented Programmers
Data administration
DP planning and control User awareness
More lax
Superficially enthusiastic
Formalized planning and control Arbitrarily held accountable
Shared data and common systems Effectively accountable
Level of DP expenditures
Stage I Initiation
Stage II Contagion
Stage III Control Transition
point
Stage IV Integration
Stage V Data administration
Data resource strategic planning Acceptance of joint user and data processing accountability Stage VI Maturity
The Stages Theory of Computer Growth 2 OF 2
Technological Discontinuity
Network Era Micro Era DP Era
Stage I Initiation
Stage II Contagion Stage III Control Stage VI Integration and Stage I of Micro Era Stage II Contagion Stage III Control Stage VI Integration and Stage I of Network Era Stage II Contagion Stage III Control Stage VI Integration
1960
Ref: Richard Nolan
1975
1980
1995
2010
IT STRATEGIC ALIGNMENT BASED ON STROBE-STROIS
High
Business strategy led
Organization led
STROBE
Strategic Orientation of Business Enterprise
Conservative
Low
Technology led
STROIS
Chan& Huff; Venkatraman
High
Strategic Orientation of IS
determinant for intention/usage
Unified Theory of Acceptance and Use of Technology (UTAUT-model)
moderator of key relationship
REF: MISQ: So Venkatesh (et al) constructed in 2003
Pyramid Power
Evolving IS organizations rise through ever-more valuable skill sets
LEVEL 3
These organizations have a great deal of credibility at the senior business-leader level. They have a passion for enabling business through IT. Level 3 Create Value LEVEL 2 Infrastructure has stabilized. These organizations initiate new processes and implement measurement and quality programs. They’re very good at delivery. There’s commitment to change and improvement.
Level 2 Build Competence, Capability & Credibility LEVEL 1
These organizations take what they’ve got and work to optimize it. There is a strong emphasis on infrastructure.
Level 1 Deliver the Basics
SOURCE: “ATTAINING TOP-LEVEL IS PERFORMANCE,” OMEGA POINT CONSULTING AND ICEX INC. Mary Silva Doctor, Richard Swanborg Jr.
Who receives, uses and benefits from the products and services this work system produces ?
WORK
SYSTEM
What aspects of the surrounding context have important effects on the work system’s operation and success ?
CUSTOMERS
What products and services does this work system produce ?
PRODUCTS & SERVICES What are the major steps in the business process ?
BUSINESS PROCESS
PARTICIPANTS
INFORMATION
TECHNOLOGY
INFRASTRUCTURE
How does the system advance the firm’s strategy ?
Ref: Steve Alter
Who performs the steps in the business process ?
What information is produced or used by the work system ?
What dedicated technology is used to perform the steps in the business process ?
What human, informational and technical infrastructure that is shared by other work systems is used by in this work system’s operation ?
The Seven Layers of a Knowledge Environment
Layer 7: Layer 6: Co-Creating value Creating next practices Facilitating discovery Incorporating diverse insights
Layer 5:
Layer 4: Layer 3: Layer 2: Layer 1:
Mobilizing action teams Creating new initiatives
Leveraging sources of competence Ease of access, visibility, and dialogue Using information Extracting contextual knowledge Information sharing Knowing best practices within the firm Training and development Building the skill base
REF: The Future of Competition – Co-Creating Unique Value with Customers, by C.K. Prahalad, Venkat Ramaswamy
IT/Geographic Scope Matrix (IGSM)
High GLOBAL LOW TECH
Highest costs, product/customer mismatch and poor margins
GLOBAL HIGH TECH High cost, high revenue Potentially high margins
LOCAL LOW TECH Low cost, low revenue Potentially good margins
Low
LOCAL HIGH TECH High costs and weak margins IT Scope
Lower performance region
Low
Higher performance region
K. Peffers, V.K.Tuunainen
High
Building an Infomediary Business
Stage 1 Building initial profiles Stage 2 Establishing standards to enrich profiles Stage 3 Leveraging profiles to extract profiles
OBJECTIVE
Build initial profiles Acquire critical mass of customers
Deepen profiles Engage vendors Establish standards
Use profiles to create value for infomediary, customers, and vendors
Ongoing agent services Ongoing message filtering service Second-wave target marketing services Purchase ID services Market research services Add impulse products Small ticket Infrequent purchases General passion Touch/smell dimension
PRIMARY SERVICE FOCUS
Basic agent services Enhanced agent services Message filtering service Enhanced message filtering services First-wave target marketing services
Net Worth by John Hagel III & Marc Singer
PRIMARY PRODUCT FOCUS
Search products specially for trigger products Large ticket Complex products Targeted passion
Add replenishment products Small ticket Frequent purchases “Specificability” Toiletries, Stationery Household supplies, Basic foods
High
Winner at risk
Self-aware winner
Self-aware winner
Understands information orientation and uses it
Winner at risk
Delivers good results, but perhaps not for long
Info-oriented laggard
Understands information orientation, but suffers fundamental weaknesses
Blind and confused
Major business change required
Low
Blind and confused
Low
Info-oriented laggard
High
Information Orientation
Ref: Marchand, Kettinger, Rollins
THE ANALYSIS FRAMEWORK
Firm Infrastructure • Web-based, distributed financial and ERP systems • On-line investor relations (e.g., information dissemination, broadcast conference calls)
Human Resource Management
• Self-service personnel and benefits administration
• Web-based training • Internet-based sharing and dissemination of company information electronic time and expense reporting Technology Development • Collaborative product design across locations and among multiple value-system participants • Knowledge directories accessible from all parts of the organization • Real-time access by R&D to on-line sales and service information Procurement • Internet-enabled demand planning; real-time available-to-promise/capable-to-promise and fulfillment • Other linkage of purchase, inventory, and forecasting systems with suppliers • Automated “requisition to pay” • Direct and indirect procurement via marketplaces, exchanges, auctions, and buyer-seller matching Inbound Logistics Operations Outbound Logistics Marketing and sales • On-line sales channels including • Real-time • Integrated • Real-time transaction of orders web sites and marketplaces integrated Information whether initiated by an end scheduling, exchange, consumer, a sales person, of a • Real-time and outside access to shipping, scheduling, and channel partner customer information, production warehouse decision making in logs, dynamic pricing, inventory • Automated customer-specific management and in-house plants, availability, on-line submission of agreements and contract terms planning, and contract assemblers quotes, and order entry advanced planning and components • Customer and channel access to and scheduling suppliers product development and delivery • On-line product configurations across the company status • Customer-tailored marketing via • Real-time and its suppliers customer profile available-to-promise • Collaborative integration with • Dissemination throughout the company of realtime inbound and inprogress inventory data • Integrated channel management including information exchange, warranty claims, and contract management (versioning, process control) Web-distributed supply chain management and capable-topromise information available in the sales force and channels customer forecasting systems • Push advertising • Tailored on-line access After sales service • On-line support of customer service representatives through e-mail response management, billing integration, co-browse, chat, “call me now”, voice-overIP, and other uses of video streaming • Customer self service via web sites and intelligent service request processing including updates to billing and shipping profiles • Real-time field service access to customer account review, schematic review, parts availability and ordering, workorder update, and service parts management
• Real-time customer feedback through Web server opt in/opt out marketing and promotion response tracking
Online Training
Knowledge Management
Learning Architecture
Infrastructure
Learning Culture, Management Ownership, and Change Management
Sound Business Case
Reinventing the Training Organization
Ref: Marc J.Rosenberg; e - Learning
Knowledge Strategies
Aggressive
Conservative
Exploiter
Explorer
Innovative
Ref: Zak, The Strategic Management of Intellectual Capital and Organizational Knowledge
Framework for Strategic Web Sites
Level 4 Business Transformation Level 3 Business Integration
Level 2 Prospecting
Level 1 Basic Presence ADD’L FEATURES Extensive information Search engine Basic interactivity
ADD’L FEATURES E-Commerce -Transactions -Communities
Customer self-service Basic customization
ADD’L FEATURES Supplier integration Customer integration
Personalization Multi-channel integration Advanced customization & configuration
FEATURES Company information
Brochures
Cost $5k-$500k
Cost Cost $500k-$5M $5M-$50M+ Increasing Cost
Cost $50M-$150M+
What e-Functions Are they Doing?
Ref: Gartner Group, Transition Partners
E Business/IT Alignment Model
Strategic Misalignment • E-Vision Without IT Delivery • Dependence on ESPs • Lack of Engineered Customer Services/Fulfillment • Dead-End Business Opportunity Business • Needs Integration With IT Commitment to Implementation Pure Web or “Clicks and Bricks” Hybrid Model • Common Business and IT Planning/Strategy • Optimized E-Business Model • Maximized Learning
E-Business Model
Toe in the Water • Discovery Phase • Minimal E-Commitment • Localized Investment • Drive With Joint Business/IT Strategy
IS Leads (But Who Follows?) • High IT E-Investment • Solution-Seeking Problem • High-Risk Positioning • Needs Integration With Business Strategy
Internal Development of E-Business Extra/Infrastructure
Source: Gartner Group
E-Business Strategizing
Opportunities
Firm Strategic Intent
E-Business Strategizing
Firm Core Competencies
Portfolio of E-Business Initiatives
E-Business Building Blocks
Threats
Ref: Place to Space: Peter Weill & Michael R. Vitale
Channels to the Customer
Strengths IVR Cheap, universal access effective for repetitive transactions Ease of use and equal access Comfortable Personal and simple: can be good for unsctructured and illinformed questions Wide coverage Information Provision Rich for predetermined queries Rich for predetermined queries Rich Variable---depends on operator or purpose Rich but may have Digitized profiling but may be competitor or "screened" by independent ratings intermediary Rich and Digitized profiling semistructured Highly variable Often lost Information Capture Digitized but limited Digitized but limited Often lost Often lost
Kiosk/ATM
Physical Mail Phone/Call Center
Customer database
Manual Data Entry
Electronic
Intermediary Internet/Email
Low transaction costs; significant flexibility Wide coverage; adds value for some segments Face-to-face unstructured
Increasing richness and flexibility
Physical Intermediary
Point of Contact--Agency, Point of Sale
Variable---depends Often lost on operator
Ref: Place to Space: Peter Weill & Michael R. Vitale
Summary of E-Broker Business Models
Business Model Sources of A. Direct to Customer Transaction fees and/or Subscriptions owining the customer Revenue Payment for content Owns Relationship E-broker Level of Intimacy for Highly intimate for Primary Customer Relationship Own Transaction Own Data brokerage and investments E-broker E-broker financial picture E-broker E-broker and FSP Customer's total financial E-broker E-broker and perheps the vortal Customer profiles and E-broker E-broker Customer segment profiles relationship FSP Highly intimate on full customer relationship and being specialized FV Medium B. Full-Service Provider (FSP) E-broker: Transaction fees FSP: Fee for service and C. Intermediary-D. Intermediary--Portal Financial Vortal (FV) with Advertising E-broker: Transaction fees E-broker: Transaction fees FV: Fee for owning the Portal: Fee for delivering potential customer to advertisers and service providers Portal Low
Type of Information Operations cost and prospects and Market Needed to Succeed intelligence
picture
product information
and preferences
Ref: Place to Space: Peter Weill & Michael R. Vitale
Knowledge Management Capabilities and Organizational Effectiveness
Technology Structure Knowledge Infrastructure Capacity
Culture
Organizational Effectiveness Acquisition
Conversion
Application
Knowledge Process Capability
Protection
Ref: Gold, Malhotra, Segars, Journal of Management IS
Perform IT Effectiveness Assessment
Understand Current ITS Framework ITS Organization Assessment Business Perspective Develop Conclusions and Recommendations Develop Implementation Strategy Priorities Near-term actions Long-term actions
Governance Organization Key Processes Cost User Relations Application Portfolio
Planning Administration Performance measurement ITS Department reviews Cost effectiveness
Business direction Business Performance Measures User View of IT Service expectations Future system requirements
Findings IT organization comparisons Issues Recommendations
Where is the Client Today?
Ref: Transition Partners
DISRUPTIVE TECHNOLOGY MAP
New Markets
BREAKTHROUGHS
WATCHFUL WAITING
Existing Markets
ENHANCEMENTS
CATEGORY KILLERS
Existing Technology
New Technology
Ref: Medtronic Technology Team, Clayton Christensen
Corporate Goals for IT
High
Operations Focus Use IT to gain better control over business processes
Dual Focus IT is key to current and future business success
Unfocused
Market Focus
No clear goals for IT
Low Low
Goals for IT are externally focused
Strategic Positioning (reach and structure)
High
Internal Impact of Potential B2B Interactions
Business Partners
Information sharing with business partners Integrated Applications
Distribution Channels
Collaboration and information sharing with channels
Operations
Interacting with Net Markets
Product & Service Development Logistics & Fulfillment
Marketing, Sales
& Service
Net Market
Personalized and improved customer relationships
Collaboration and information sharing with suppliers
Suppliers
Ref: NerveWire : www.nervewire.com
Customers
THE IO MODEL (1 of 2)
Information Orientation (IO) Measures the capabilities of a company to effectively manage and use information
Information technology practices (ITP) capability The capability of a company to effectively manage appropriate IT applications and infrastructure in support of operational, decision-making and communication processes
Information management practices (IMP) capability The capability of a company to manage information effectively over its life cycle
Information behaviors and values (IBV) capability The capability of a company to instil and promote behaviors and values in its staff for effective use of information Integrity Is an organizational value manifested through individual behavior that is characterized by the absence of manipulating information for personal gains such as knowingly passing on inaccurate information, distributing information to justify decisions after the fact or keeping information to oneself. Good information integrity results in effective sharing of sensitive information
Sensing Involves how information is detected and identified concerning: economic, social and political changes; competitor’ innovations that might impact the business; market shifts and customer demands for new products; and anticipated problems with suppliers and partners
IT for operational support Includes the software, hardware, telecommunication networks and technical expertise to control business operations, to ensure that lower-skilled workers perform their responsibilities consistently and with high quality and to improve the efficiency of operations IT for business process support Focuses on the deployment of software, hardware, networks and technical expertise to facilitate the management of business processes and people across functions within the company and externally with suppliers and customers
Collecting Consists of the systematic process of gathering relevant information by profiling information needs of employees; developing filter mechanisms (computerized & non-computerized) to prevent information overload; providing access to existing collective knowledge; and training and rewarding employees for accurately and completely collecting information for which they are responsible
Formality Refers to the degree to which members of an organization use and trust formal sources of information. Depending on the size, virtualness, and geographic dispersion of an organization, this balance shifts towards more formal or informal information behavior Control Is the disclosure of information about business performance to all employees to influence and direct individual and, subsequently, company performance
Ref: Marchand, Kettinger, Rollins
THE IO MODEL (2 of 2)
IT for innovation support Includes the software, hardware, telecommunication networks and capabilities that facilitate people’s creativity and that enable the exploration, development and sharing of new ideas. It also includes the hardware and software support to develop and introduce new products and services Organizing Includes indexing, classifying and linking information and databases together to provide access within and across business units and functions; training and rewarding employees for accurately and completely organizing information for which they are responsible Sharing Is the free exchange of non-sensitive and sensitive information. Sharing occurs between individuals in teams, across functional boundaries and across organizational boundaries (I.e. customers, suppliers and partners)
IT for management support Includes the software, hardware, telecommunication networks and capabilities that facilitate executive decision-making. It facilitates monitoring and analysis of internal and external business issues concerning knowledge sharing, market developments, general business situations, market positioning, future market direction and business risk
Processing Into useful knowledge consists of accessing and analyzing appropriate information sources and databases before business decisions are made. Hiring, training, evaluating and rewarding people with analytical skills is essential for processing information into useful knowledge
Information transparency Occurs when an organization’s employees trust each other enough to talk about failures, errors and mistakes in an open and constructive manner and without fear of unfair repercussions
Maintaining Involves reusing existing information to avoid collecting the same information again, updating information databases so that they remain current and refreshing data to ensure that people are using the best information available
Information Proactiveness Occurs when an organization’s staff actively seek out and respond to changes in their competitive environment and think about how to use this information to enhance existing and create new products and services
Ref: Marchand, Kettinger, Rollins
External IT Strategy Model
Sector
Context
Delivery
IT is the means of of delivering goods and services Computer-based transaction systems underpin business
Dependent
Business strategies increasingly depend on IT Business and functional strategies are automated
Drive
IT potentially provides new strategic opportunities Specific applications are exploited
Delayed
IT has no strategic impact Opportunities not yet apparent
Characteristics
Information management style Planning Organization Control Technology
Integral Corporate Tight-loose Architectural
Derived Business unit Loose-tight Pragmatic
IT-push Line Loose Enabling
Default IT Tight Ad hoc
Implied planning styles
Adapted from Earl (1989)
Bottom-up
Top-down
Inside-out
None
Four Types of Product/Process Development Projects
Research and Advanced Development New Core Process Breakthrough or Radical Platform or Next Generation
Process Changes
NextGeneration Process Single Dept. Upgrade Tuning and Incremental
Product Changes
New Core Product Next-Generation Product
Addition to Product Family
Add-ons and Enhancements
Derivative (Enhancements, Hybrids, and Cost Reduced Versions
Ref: Revolutionizing Product Development – Steven C. Wheelwright & Kim B. Clark
A Theoretical Model of Mind-Set Formation and Influence in Digital Environments
Modified Goals
Goals to Be Attained
Evaluation of Experience
Knowledge and Experience
Selection of Mind-Set • Implemental • Deliberate • Exploratory
DE Navigation Characteristics • Which sites to visit • How long to stay • What information to search
Changed Emotion
Emotional State
Specific Evaluation
• Brand Image • Web site • Firm image
Ref: Dholakia & Baguzzi
ANTHONY’S TRIANGLE
Information Content Policies Plans Budgets Objectives Measurement Schedules Revenues Profits Costs Performance Services Goods Management Level Information Characteristics External Source Wide Scope Ad Hoc Unscheduled Future-Oriented Infrequent Summarized Internal Source Narrow Focus Pre specified Scheduled Historical Frequent Detailed
Strategic
Tactical Operational
Responsibility Authority
ZACHMANN
FIRM INFRASTRUCTUTRE
HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT
Information Systems Technology Planning and Budgeting Technology Office Technology Training Technology Motivation Research Information Systems Technology Product Technology Computer Aided Design Pilot Plant technology Software Development Tools Information Systems Technology
PROCUREMENT
Information Systems Technology Communications Systems technology Transportation Systems technology
Basic Process Technology Materials Technology Machine tool technology Material Heading Material handling technology technology Storage and preserve Packaging technology technology Maintenance methods Communication sys. Testing Technology Technology Building Design Information Sys.Technology Operational Technology Information System technology Transportation Technology Transportation Technology Material Handling Technology Packaging Technology Media Technology Diagnostic and Testing Technology
Communication Sys. Technology
Information system technology
Audio & Video Communication System Technology Recording technology Information system Communication technology Sys. Technology Information System technology
INBOUND LOGISTICS
OPERATIONS
OUTBOUND LOGISTICS
MARKETING & SALES
SERVICE
Representative Technologies in a Firm’s Value Chain
INFORMATION VALUE CHAIN
DATA COLLECTION AND TRANSMISSION
DATA MANAGEMENT
DATA INTERPRETATION: INFORMATION
MODELS
DECISION SUPPORT SYSTEMS
•Customer files •Casual data •POS •diary Panels •inventory •Availability •HHC www •Benchmark •Buy
•Relational •Objects •Spreadsheet •Hypertext •ISO
•GDSS •Time - Varying •EIS Mass •Graphical Produced •GIS •Robust •PDA •Adaptable •Summary •NeuralNets •Statistics •Simulation •Multimedia •Virtual Reality
•K systems •KBS •Models vs. Managers •Adaptations to Managerial Inputs
A FRAMEWORK FOR ELECTRONIC COMMERCE
Evaluation:
Framing the Market Opportunity
Business Model
Customer Market Imple Metrics Communications Interface mentation And and Branding valuation
e-Commerce Strategy
Network Infrastructure
Media Infrastructure
Market Infrastructure
Public and Politics
Factors Determining a Technology’s Acceptance
Platform Availability
Stable Platform
Affordability
Convenience
Source: Stephen P.Bradley and Richard L.Nolan, eds., Sense and Respond(Boston Harvard Business School Press, 1999).
PORTER’S FIVE FORCES MODEL (including the major determinant of each force)
Threat of substitute products or services
(+) By making the overall industry more efficient, the Internet can expand the size of the market () The proliferation if Internet approaches creates new substitution threats
Buyers Bargaining power of suppliers Rivalry among existing competitors
Bargaining power of channels Bargaining power of end users
(+) Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give suppliers access to more customers
(-) The Internet provides a channel for suppliers to reach end users, reducing the leverage of intervening companies (=) Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurements to standardized products that reduce differentiation () Reduced barriers to entry and the proliferation of competitors downstream shifts power to suppliers
() Reduces differences among competitors as offerings are difficult to keep proprietary
(+) Migrates competition to price (-) Widens the geographic market, increasing the number of competitors () Lowers variable cost relative to fixed cost, increasing pressures for price discounting
(+) Eliminates powerful channels or improves bargaining power over traditional channels
() Shifts bargaining power to end consumers (-) Reduces switching costs
() Reduces barriers to entry such as the need for a sales force, access to channels, and physical assets, anything that Internet technology eliminates or makes easier to do reduces barriers to entry
(-) Internet applications are difficult to keep proprietary from new entrants
Barriers to entry
() A flood of new entrants has come into many industries
Professor Luftman’s Books
T-PORTFOLIO TEMPLATE
Low IT SHAPING BUSINESS High
High
IT SUPPORTING BUSINESS
Low
TODAY
Ref: Competing in the Information Age by Jerry N. Luftman
TOMORROW
SUSTAINABLE COMPETITIVE ADVANTAGE AND BARRIERS TO IMITATION
Competitive Threats
IT Project Barrier
IT-Enabled Sustainable Competitive advantage
Preemption Barrier
Complementary Resource Barrier
Competitive Threats
Ref: Competing in the Information Age by Jerry N. Luftman
IT Resource and Capability Barrier
FRAMEWORK FOR BUSINESS INTEGRATION
Resource/integration need Organizational units (functions/departments) Examples of integration mechanisms E-mail, collaborative software, lateral teams Top management strategy, budgets, performance metrics E-mail, collaborative software, knowledge management systems Organization policies/structure Enabling environment/infrastructure
Ref: Competing in the Information Age by Jerry N. Luftman
Organizational integration
Decision makers
Face-to-face meetings, job design, performance metrics
Workflow, collaborative systems, SCM, CRM, Web services Process owners, teams, performance metrics, service level agreements Inter-process communication, RPC, messaging, ERP, Web services Data dictionaries Databases, XML Networks Standards
Systems integration
Business processes (both internal & external to the firm)
Systems architecture
Applications
Data
Platforms
THE INTEGRATION POINTS BETWEEN COMPANIES
Financial Service Provider Other Exchanges Logistics Provider
Buying Organization
Marketplace Value-Added Services Hosted Infrastructure Services
Selling Organization Supplier Order Management
Desktop Procurement
Transaction Engine
Enterprise Systems
Plan and Manage the Enterprise
Enterprise Systems
EDI VAN/ETN Ref: Competing in the Information Age by Jerry N. Luftman
FOUR NEW PRINCIPLES FOR IT
Driver Tier One
Rolling Plans
Provides
Bridge Between Short Term Horizon and Long Term Foundations
Three Tier Architecture
Portfolio of “Ventures”
Translates Plans into Development Projects
Sets Technical Guidelines
Work on Tier One and New Tier Three Applications
Provides Framework for Collaboration
New Venture Development
Cast Changes with Phases
MultiDisciplinary Teams
Ref: Competing in the Information Age by Jerry N. Luftman
The Six Phases of Business Transformation
New Core Competency
PERFORMANCE FOCUS
Scope Value-added Processes and Services
PHASE VI Operating Initiatives PHASE IV Business Enhancement PHASE V Strategy and Organization Redefinition PHASE II Process Improvement PHASE I Strategy Initiative
Infrastructure
Excellence and Efficiency
PHASE III Infrastructural Design and Deployment
External Drivers
New Direction
Internal Operations
Alignment Customer and and Supplier Architecture Interface
Redefinition
New Business units
ORGANIZATION FOCUS
The IT Platform
Anyone anywhere Customers Partners regardless of facility base
REACH
Whom
Customers partners w/same IT facility base
Intracompany, locations abroad
RANGE
What Services Can We Deliver
Standard messages
Access to stored data
Internal locations
Single Transactions
Cooperative transactions
The Adaptive Loop
Sense
Sensing
Act
People in Roles Accountable for Outcomes
Interpret
Decide Responding
Observe Orient Decide Act Loop
REF : STEVE HAECKEL
Increased control Better Information Better integration Improved quality
Increased sales Competitive advantage Competitive necessity Market positioning
Informational
Strategic
Transactional Infrastructure
Cut costs increase throughput
Business Integration Business flexibility Reduced marginal cost of business unit IT Reduced IT Costs Standardization
Characteristic
Global exporter
Homogeneous
Multinational
Homogeneous,some customized Distributed but highly controlled by home country Sharing innovations outbound from H.Q
Multilocal
Customized,some homogeneous Highly duplicated in each country Local responsiveness
Global
Flexible architecture allowing for mass customization Highly networked and distributed around the globe EOS of production and knowledge,and low cost/customer driven Decisions made at centers of competence Supports global and local customers
Products and services Value chain activities Basis of competition
Highly concentrated in home country Economies of scale in production
Organization
Home country nationals Global or local customers get the same treatment
H.Q.controls national companies Local customers supported by national sales companies global customers with difficulty
Customers
Strong national organizations,H.Q .plays primarily financial role Local customer focus,global customers only with great difficulty
Business Characteristics of Global Exporter,Multinational, Multilocal,and Global Companies
Consulting Methods
SIM Information Systems Planning Approach
1 SIM Vision & Mission
Governance
5 Target IS Capability Strategy for Achieving Target
7
2
SIM 2001 Strategies & Goals
Critical Success 3 Factors & Guiding Principles
6
Current IS Capability
8 Project Plans
4
Technology Projections
10
Periodic Updates
9 Execute Plans
SIM IS Strategy Steering Committee, facilitated by Dr. Luftman
The Scale and Scope of Business Process Reengineering
Extensive
Functional Integration
Business Redefinition
Scale of BPR
[ORGANIZATIONS] Limited Functional Refinement Process Redesign
Narrow
Broad Scope of BPR [VALUE CHAIN]
Ref: Hammer, HBR 1990
PROFIT PATTERNS
Mega Patterns
No profit Back to profit Convergence Collapse of middle De Facto standards Technology shifts the board
Value Chain Patterns
Customer Patterns Channel Patterns Product Patterns Knowledge Patterns Organizational Patterns
Disintegration
Value chain squeeze
Strengthening the weak link
Reintegration
Profit shift
Microsegmentation Channel concentration Producer to blockbuster
Power shift
Redefinition
Multiplication
Compression
Reintermediation
Product to brand
Profit multiplier
Product to pyramid
Product to solution
Product to customer knowledge
Operations to knowledge
Knowledge to product
Skill shift
Network
Cornerstoning
Conventional to digital business design
Ref: Profit Patterns by A.Slywotxky, D. Morrison, T. Moser, K. Mundt & J. Quella; Random House, 1999
Service Profit Chain
Internal service quality
Employee loyalty Employee satisfaction
Employee productivity
External service value
Revenue growth Customer satisfaction Customer loyalty Profitability
Source: Service Management Interest Group, Harvard Business School
Cause and Effect (Fishbone or Ishikawa) Diagram
A cause and effect of Fishbone Diagram represents the relationships between a given effect and it’s potential causes (cause and effect analysis).Cause and Effect Diagrams are drawn to sort out and relate the interactions among the factors affecting a process.A well-detailed Cause and Effect Diagram will take the shape of a fishbone
Category
Cause Cause
Category
Cause Cause Effect
Cause
Cause
Category
Category
SA MATURITY FISHBONE
Partnership
IT as cost center Insufficient role of IT in business strategy
Perceived as service organization
Scope Architecture
poor architecture Slow to move IT lack credibility IT infighting bad experience Little synergy of systems and data
Skills
IT lack business knowledge at all levels Training is left to the individual
IT not committed to understand business
quality issues No commitment to learn business (IT) No portfolio mgmt. Lack standards
Incentives not aligned with business
IT not aware of business direction No knowledge management Info not communicated Pockets of understanding
Value measurements are non-existent SLA at functional level, not enforced
No benchmarking Conflicting metrics Not in terms of the business No feedback to PMC
Strategic Alignment Maturity
IT not involved at executive level CIO does not report to CEO IT not embraced by all senior mgmt.
Communications
Competency/ Measurement
Governance
Customer Relationship Management Model
Create a Database
Analysis
Customer Selection Customer Targeting Relationship Marketing Privacy Issues Metrics
Ref: A framework for CRM, Russell S. Winer
Six Thinking Hats Technique
Blue hat thinking: Facilitates the thinking process White hat thinking: An objective look at data and information Green hat thinking: New ideas and creative thinking Red hat thinking: Legitimizes feelings, hunches, and intuition Black hat thinking: Logical negative, judgment and caution Yellow hat thinking: Logical positive, feasibility and benefits
Book by ED DeBono
This is the IDEO way
Five steps in the process of designing a better consumer experience
1. OBSERVATION 2. BRAINSTORMING • • • • • • • Defer Judgment Build on the ideas of others Encourage wild ideas Go for quantity Be visual Stay focused on the topic One conversation at a time 3. RAPID PROTOTYPING • • • • • • Mock up everything Use Videography Go fast No frills Create scenarios Body storm
• • • • • • •
Shadowing Behavioral Mapping Consumer Journey Camera Journals Extreme User Interviews Story Telling Unfocus Groups
4. REFINING • • • • • • Brainstorm Focus Prototyping Engage the client Be disciplined Focus Get agreement
5. IMPLEMENTATION • • Tap all resources The workforce
REF: BusinessWeek
H/R, VALUE, CHANGE, CREDIBILITY, QUALITY
Reinventing Core Strategies and Creating Industry Revolution
Yes
Slow-Moving Bureaucrats
Can your company reinvent its strategy Cost and Efficiency Addicts One-Time Visionaries
Gray-Haired Revolutionaries
No
No
Can your company create an industry revolution?
Yes
Ref: LEADING THE REVOLUTION, Hamel
Seven Organizational Change Propositions
Radical Exchange dominates change Reengineering 2: Transformation as the invention of a business coalition
Market redefinition
Supply-chain expansion Supply-chain discovery
Range of Organizational/ technological discontinuity
Business process redefinition
Business model refinement
Efficiency dominates change
Business process redesign
Incremental
Business process improvement
Process Business model
Reengineering 1: Transformation as an improvement or refinement of an existing business model
Supply chain
Markets
Ref: Albert H. Segars and James W. Dean
View of the Commitment Management Protocol
Customer role
Define
Asses s
Type of communication
Request
Agree
Report
Accept
Supplier role
Negotiate
Perform
TIME
Ref : Steve Haeckel
The Logics of Alliance Value Creation
GLOBALIZATION ”Racing for the World”
Building Critical Mass
Reaching New Markets
Plugging skill gaps
Gaining Competitive Strength through Cooption
Leveraging Cospecialized Resources
Gaining Competence through Internalized Learning
Building Nodal Positions in Coalitions
Creating New Opportunities
Building New Competencies
”Racing for the Future” TECHNOLOGY
Ref; Yves L. Doz & Gary Hamel, Alliance Advantage
How Team Design Shapes Team Performance Processes
Compelling direction
Energizes
Enabling team structure
+ Team Task Design
Supportive organizational context
+ Reward System
Team performance processes
Effort
Orients Attention
+ Norms of Conduct
+ Information System
Performance Strategy
Engages Talents
+ Team Composition
+ Educational System
Knowledge and skill
Ref: J.Richard Hackman “Leading Teams”, HBS
Guiding Stars: The Four Factors
Leadership
People Systems STAR
Structure & Governance
Ref : Lorsch Tierney, HBS
Culture
The Six Leadership Styles at a Glance
Coercive Authoritative Affiliative
The leader’s Demands modus immediate operandi compliance The style in a “Do what I phrase tell you” Drive to Underlying ach ieve, emotional initiative, intelligence self-control competencies When the style works best In a crisis ,to kick start a turnaround, or with problem employees Negative Mobilizes people toward a vision
Democratic Pacesetting
Coaching
Creates harmony Forges and builds consensus emotional bonds through participation “People come first” “What do you think?”
Sets high sta ndards Develops people for performance for the future
“Come with me”
“Do as I do, now.” “Try this”
Self confidence, Empathy, Collaboration, Conscientiousness, Developing empathy, change building team leadership, drive to achieve, others,empathy, catalyst relationships, communication initiative self-awareness Communication When changes require a new vision or when a clear direction is needed Most strongly positive To heal rifts in a team or to motivate people during stressful circumstances Positive To build buy -in To get quick results To help an or consensus, or from a highly employee to get input from motivated and improve valuable competent team performance or employees develop long term strengths Positive Negative Positive
Overall impact on climate
REF : DANIEL GOLEMAN, HARVARD BUSINESS REVIEW, April 2000
The Open-Innovation Model
Types of Innovation Generators
How
Explorers
Merchants
Architects
Missionaries
Discover
Discover and sell to others
Coordinate
Serve a cause
Purpose
For innovation’s sake Xerox PARC Telcordia
For commercial goal Qualcomm
For a portion of the commercial benefit Nokia
For the benefit of others Linux
Examples
“The Open-Innovation Model,” by Chesbrough, MIT Sloan Management Review, Spring 2003, vol. 44, no. 3
Three Value Levels of the Firm
Do Maximum Good… i.e., Create Maximum Value
Open Enterprise Organization Culture Maximizes the creation of value simultaneously in economic, social, Level 3 and ecological terms. Relationship Management Culture Value created but typically traded off, usually after the demands of investors are satisfied.
Level 2
Do Minimum Harm… i.e., Avoid Destroying Value
Level 1
Compliance Culture Preserves value consistent with laws and norms and seeks to avoid the unacceptable destruction of value (economic, social, or ecological.)
Ref: Wheeler, Colbert, & Friedman; The Naked Corporation by Don Tapscott and David Ticoll
The Focus – Energy Matrix
high
Disengagement
Purposefulness
Focus
Procrastination
Distraction
low
REF: HEIKE BRUCH SUMANTRA GHOSHAL
Energy
high
Migration Patch of Layered Organizational Change
Migration Path
Stage 1: Finding Near-Term Profitability
Stage 2: Creating Focus
Stage 3: Accelerating Growth
Primary Lever for Change
Developing New Skills •Process orchestration
Moving to New Structures
Designing New Systems
Key Areas
•Information Technology
•Three business types carved out as independent profit centers
•Performance measurement
•Rewards •Knowledge development / management
Ref: “Out of the Box” by John Hagel III, HBS
FIVE LEVELS OF LEADERSHIP
5 PERSONHOOD Respect People follow because of who you are and what you represent 4 PEOPLE DEVELOPMENT Reproduction People follow because of what you have done for them 3 NOTE: This is where long range growth occurs. Your commitment to developing leaders will insure ongoing growth to the organization and to people. Do whatever you can to achieve and stay on this level NOTE: This is where success is sensed by most people. They like you and what you are doing. Problems are fixed with very little effort because of momentum. NOTE: This step is reserved for leaders who have spent years growing people and organizations. Few make it. Those who do are bigger than life.
PRODUCTION
Results People follow because of what 2 PERMISSION Relationships People follow because they want to 1 POSITION Rights People follow because you have done for the organization
NOTE: People will follow you beyond your stated authority. This level allows work to be fun. Caution: Staying too long on this level without rising will cause highly motivated people to become restless.
NOTE: Your influence will not exceed beyond the lines of your job description.
they have to
The longer you stay here, the higher the turnover and the lower the morale.
Ref: John C.Maxwell; Developing the Leader Within You
Designing a TQM program
Define the TQM vision Identify a set of measurable objectives and related strategy
Set up a project team
Implement training program on TQM for staff concerned Define quality control model with measuring functions and parameters Design Instrument for data collection and output required Estimate and gather resources required Design continuous improvement management strategies Design and development of an MIS Collect data and generate output report Collect Data and generate output report Ensure continuous improvement
ORGANIZATION
Economic Capital Operations Loop
Financial and Physical Capital + Value Processes Intellectual and Human Capital + Transformational Processes
Strategic Capital
Plans Loop
Economic Capital
Investments Gifts and Dividends
Outside World
Knowledge and Talent
Options Value (B-s)
Risk
Diminishing Returns Innovation
Ref: Boer, Real Options Solutions
Drivers of globalization
Global market convergence
•Similar customer needs •Global customers •Transferable marketing
Government influence
•Trade policies •Technical standards •Host government policies
Global strategies
•Scale economies •Sourcing efficiencies •Country-specific costs •High product development costs
Cost advantages
•Interdependence
•Competitors global •High exports / imports
Global competition
Ref: G. Yip, Total Global Strategy
CRM can lift revenues (acquisition, retention, cross-sell) as well as reduce expenses (efficiency, effectiveness). Most organizations have focused on the revenue generating aspects of CRM. However, in light of recent changes in the business climate and the economy, companies must begin to realize the cost reduction benefits of CRM
BOTH SIDES OF THE ‘CRM EQUATION’ PROFITABILITY Financial Performance Customer Strategy Revenue Process Drivers Organization and Technology Enablers Cost
X-sell/Up-sell
Management Effectiveness
Channel Optimization
Efficiency
MARKETING SALES SERVICE
Ref: Price Waterhouse Coopers
Eight Steps to Transforming Your Organization ( 1 of 2)
Establishing a sense of urgency
Examining market and competitive realities Identifying and discussing crises, potential crises, or major opportunities
1 2 3 4 5
Forming a Powerful Guiding Coalition
Assembling a group with enough power to lead the change effort Encouraging the group to work together as a team
Creating a Vision
Creating a vision to help direct the change effort Developing strategies for achieving that vision
Communicating the Vision
Using every vehicle possible to communicate the new vision and strategies
Teaching new behaviors by the example of the guiding coalition
Empowering Others to Act on the Vision
Getting rid of obstacles to change Changing systems or structures that seriously undermine the vision Encouraging risk taking and nontraditional ideas, activities, and actions
Eight Steps to Transforming Your organization ( 2 of 2 )
Planning for and Creating Short-Term Wins
Planning for visible performance improvements Creating those improvements Recognizing and rewarding employees involved in the improvements
6 7
8
Consolidating Improvements and Producing Still More Change
Using increased credibility to change systems, structures, and policies that don’t fit the vision Hiring, promoting, and developing employees who can implement the vision Reinvigorating the process with new projects, themes, and change agents
Institutionalizing New Approaches
Articulating the connections that new behaviors and corporate success
Developing the means to ensure leadership development and succession
Marketing, Product Innovation
Delta Method: Three Distinct Strategic Options
Competition Based on System Economics: Complementor lock-in, competitor lock-out, proprietary standard
System Lock-in
Customer Solutions
Competition Based on Customer Economics: Reducing customer costs or increasing profits
Ref: Wilde & Hax, Sloan Management Review, Winter 1999
Best Products
Competition Based on Product Economics: Low cost or differentiated position
Marketing evolution with characteristics and technology attributes
Mass Marketing
Target Marketing
Customer Marketing
1 to 1 Marketing
Characteristics • Market Share • Individual Sales • Limited Segmentation • Huge Campaigns • Not Cost-effective • Single Treatments • Focus on Transactions • # of Relationships
Characteristics • Segmented Campaigns • Small Mass Marketing • Focus on Products
Characteristics • Customer Share • Life Time Value • Model Distribution • On-going Refinement • Multiple Treatments • Focus on Customers • Breadth of Relationships • Event-Driven
Characteristics • Interactive Segmentation • Real-Time Matching • Interactive TV • Active Web Pages • Customer Interaction • One to One Relationships • Real-Time Marketing • Prediction-Driven
Technology • In-House • Outsourced Mailings • Flat Files/Mailing Lists • Some Packaged Appl’s
Technology • Individual Database (s) • Application for Projects • Proprietary Solutions • Limited Analysis
Technology • Data Warehouse • Integrated Data & Appl’s • Customer Knowledge • Modeling, Analysis & Refinement Process
Technology • Integrated Data Warehouse • Internet Enabled • Many Touch Point Integrated • Cross Organization Process • Management by Interaction
REF: Accelerating Customer Relationships by Ronald S. Swift
The Spectrum of Co-Creation Experiences
Increasing Complexity of the Consumer-Firm Interaction
Co-Creation Experience Firm and consumer (one to one) Variety of Co-Creation Experiences Firm and Consumer Communities (one to many) Personalization of the Co-Creation Experiences Multiple Firms and Multiple Communities (Many to many)
Increasing Uniqueness of Value
REF: The Future of Competition – Co-Creating Unique Value with Customers, by C.K. Prahalad, Venkat Ramaswamy
Enhance Add functionality or features to current product/service offerings or improve performance of existing business
Extend Enter new line of business and/or add new business models
Extend
Enhance
Expand
Exit
Exit Exit a business or market or drop a product/service offering
Expand Add new product/service offerings or enter new geographic markets
Ref: Corporate Information Strategy & Management by Lynda M. Applegate, Robert D. Austin & F. Warren McFarlan
DRUCKER’S SEVEN SOURCES OF INNOVATION
1. 2. 3. 4. 5. 6. 7.
HBR Nov-Dec 1998
The unexpected Incongruities Process need Structured change Demographics Perception New Knowledge
Product Process Change Matrix
Mass Customization
Invention
Mass
Production
Continuous Improvement
Stable
Dynamic
Process Change
Competing in the Information Age: Strategic Alignment in Practice
New Product Team Learning Strategies
Evolutionary Market Innovation New Market Model Strategy Incremental Innovation
Discontinuous Innovation New Venture Unit Strategy Evolutionary Technical Innovation Technical Entrepreneur Strategy
Cost Reduction Strategy
Existing
New
Technology
Ref. Gary.S.Lynn
THE FOUR CATEGORIES OF COMMUNICATIONS
Direct
•Sales force •Retail Sales •Customer Service Representative
Personalized
•Permission Marketing •Personalized Recommendations •Personalized Advertisements •Personalized Webpages •Personalized Upsell •Personalized e-Commerce
Traditional Mass Marketing
•Television •Radio •Print •Billboards •Superior Customer Service
General Approaches
•Banner Ads •E-Mail •Viral Marketing •Portal Sponsorship/Exclusive Agreements •Associate Programs •Online and Offline Partnerships •Provide Information to Entice Customer Purchase •Leverage Customer Base
Ref: e-Commerce, Jeffrey F. Rayport, Bernard J. Jaworski
THE P CYCLE OF A SUCCESSFUL BUSINESS IDEA
Program
Perspective Managerial awareness Project Pervasiveness Pilot Progenitor
Time
Ref: Ideas at Work by Thomas H Davenport & Laurence Prusak with H. James Wilson
The New Competitive Space for Innovation
Enhanced Network of Competence Including Communities
Experience Networks Experience Integration Supply Networks Systems Integration Experience Innovation
LOCUS OF COMPETENCE
Extended Enterprise
The Firm, and its Supply Base
Supply Chains Product Innovation Product Space Solutions Innovation Experience Innovation Experience Integration
Solutions Space
LOCUS OF INNOVATION
Ref: Clark Gilbert & Sloan Management Review, 2003
The Cultural-Bias Landscape
Strong High-Tech Startups, Labs, Think Tanks, Artisans High-Value Product and Service Companies MORE INNOVATION, MORE CULTURAL TENSION
PRODUCTINNOVATION CULTURAL BIAS
Dominant Design Emerges
High-Volume Product and Service Companies, Upscale Retailers LESS INNOVATION, LESS CULTURAL TENSION Distribution and Logistics Companies Discount Retailers
Weak Weak
BUSINESS-INNOVATION CULTURAL BIAS
Strong
Ref: “Shifting Cultural Gears in Technology – Driven Industries” by Paul J.Kampas; MIT Sloan Management Review, Winter 2003 Vol.44.No.2
ARCHETYPAL BRAND POSITIONS
THE REIFIED – ENACTED BRAND • Harley-Davidson • Ben and Jerry’s (brand is strongly linked to the material product/service and is used to generate meaning and identity)
ENACTED (focus on what it means rather than what it can do)
THE ABSTRACTENACTED BRAND • Tiffany • Virgin • Harrods (brand is independent of product, or even groups of products, and is used to generate meaning and identity)
REIFIED (brand closely identified with product)
THE REIFIED-FUNCTIONAL BRAND • WD40
ABSTRACT (brand almost product-independent)
THE ABSTRACTFUNCTIONAL BRAND • Co-ops • U.S. Department of Transportation (brand is relatively independent of product, or even groups of products, and is primarily utilized for its functionality)
• Crest
• Life Savers • Copperslip (brand is strongly linked to the material product/service and is primarily utilized for its functionality)
FUNCTIONAL (focus on what it can do rather than what it means)
Ref: “Understanding and Managing the Brand Space” – Pierre Berthon, Morris B.Holbrook and James M.Hulbert; MIT Sloan Management Review, Winter 2003 Vol. 44 No.2
Choosing a Loyalty Strategy
Butterflies
High Profitability
• good fit between company’s offerings and customer’s needs • high profit potential Actions: • aim to achieve transactional satisfaction, not attitudinal loyalty • milk the accounts only as long as there are active •Key challenge is to cease investing soon enough True friends
• good fit between company’s offerings and customer’s needs
• highest profit potential Actions: • communicate consistently but not too often • build both attitudinal and behavioral loyalty • delight these customers to nature, defend, and retain them
Barnacles Strangers
Low Profitability
• little fit between company’s offerings and customer’s needs • lowest profit potential Actions: • make no investment in these relationships • make profit on every transaction • limited fit between company’s offerings and customer’s needs • low profit potential Actions: • measure both the size and share of wallet • if share of wallet is low, focus on up-and cross- selling •If size of wallet is small, impose strict cost controls Short-term Customers
Ref. HBR, ”The Mismanagement of Customers Loyalty” – Werner Reinartz and V.Kumar
Long-term Customers
MARKET SEGMENTATION APPROACHES
Segmentation Type
Geographics Demographics
Description
Divides market into different geographical units Divides market on the basis of demographic variables Divides market on the basis of companyspecific variables Divides market based on how customers actually buy and use the product Divides market on the situation that leads to a product need, purchase, or use Divides market based on lifestyle and/or personality Divides market based on benefits or qualities sought from the product
Examples - Variables
Country, region, city
Age, gender, income
Firmographics
Number of employees, company size Website loyalty, prior purchases Routine occasion, special occasion Personality (laid-back, type A), lifestyle Convenience, economy, quality
Behavioral
Occasion (Situational) Psychographics
Benefits
Ref: Jeffrey F.Rayport, Bernard J.Jaworski
THE EXPERIENCE ECONOMY
Economic Offering Economy Economic function Nature of offering Key attribute Method of supply Seller Buyer Factors of demand Commodities Agrarian Extract Fungible Natural Stored in bulk Trader Market Characteristics Goods Industrial Make Tangible Standardized Services Service Deliver Intangible Customized Experiences Experience Stage Memorable Personal Revealed over a duration Stager Guest Sensations
Inventoried after Delivered on production demand Manufacturers User Features Provider Client Benefits
REF : B.JOSEPH PINE II , JAMES H. GILMORE
The Buyer Utility Map
By locating a new product on one of the 36 spaces shown here, managers can clearly see how the new idea creates a different utility proposition from existing products
The Six Stages of the Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
Customer Productivity Simplicity
The Six Utility Levers
Convenience
Risk
Fun and Image Environmental Friendliness
Source: Kim & Mauborgne, Harvard Business Review September-October 2000
Types of Competitive Advantage 1 of 3
Offer Advantage
Customer Advantage
Industry Advantage
Category Advantage
Ref: Geoffrey Moore, “Living on the Fault Line”
Four Value Disciplines
Operational excellence Focus Process efficiency Internal timing (rhythm) Customer intimacy Customer experience Customer response time
2 of 3
Disruptive Innovation Categorical differentiation Time to adoption
Product Leadership
Offer quality
Orientation To time
Competitive response time
Key metric
Number of misses
Number of hits
Product specifications
10X advantage
Culture fit
Control culture Operations, Finance
Collaboration culture Marketing, Customer support
Competence culture Sales, Engineering
Cultivation culture R&D
Organizational Leadership from
Ref: Geoffrey Moore, “Living on the Fault Line”
Competitive Advantage Grid 3 of 3
Offer Advantage Operational Excellence Customer Advantage Industry Advantage Category Advantage
Customer Intimacy
Product Leadership
Disruptive Innovation
Ref: Geoffrey Moore, “Living on the Fault Line”
Unbundling of Traditional Businesses
Customer Relationship Infrastructure Management Product Innovation and Commercialization Product innovation
Skills
Direct marketing
Operations
Economics
Economies of scope
Economies of scale
Efficiencies of speed
Culture
Service-oriented
Cost conscious
Creative culture
Ref: “Out of the Box” by John Hagel III, HBS
LEAD WITH AN ENTREPRENEURIAL MINDSET
•Set the climate •Orchestrate the process •Engage in hands-on leadership
ESTABLISH THE ENTREPRENEURIAL FRAME
•Set a challenging goal •Direct others’ attention to that goal •Make the goal a priority on your personal agenda
STOCK THE OPPORTUNITY REGISTER
•Redesign •Dedifferentiate •Resegment •Reconfigure •Build breakthrough competences
FOCUS ON THE BEST OPPPRTUNITIES
•Stratify to define target arenas •Define real options •Build a portfolio of opportunities to pursue
ADAPTIVE EXECUTION
•Define entry strategies and likely competitive response •Create discovery-driven plans •Assess project progress
Ref: THE ENTREPRENEURIAL MINDSET, Rita Gunther McGrath, Ian MacMillan
Customer Understanding
Be Unique Be Relevant Built Esteem Know & Understand
Attract Customers
Satisfy Customers
Keep Customers
Build Customers Bond & Loyalty
Advertise & Market
Meet Rational Needs
Meet Emotional Needs
Meet both Rational & Emotional Needs
Adapted from Interbrand, Y&R, & NOP World Group
A Holistic Marketing Framework
Demand Management Resource Management Network Management Collaborative Network
Customer Focus
Value Exploration
Core Competencies
Cognitive space
Competency space
Resource space
Market Offerings Value Creation
Customer benefits Business domain
Business Architecture
Business partners
Marketing Activities
Operational system
Internal resource management Business partner management
Value Delivery
Customer relationship management
Ref. Kotler, Jain, Maesincee - Marketing Moves
Demand Uncertainty
Low High
Supply Uncertainty
(Functional Products)
Low (Stable Process) High
(Innovative Products)
Efficient-supply chairs
Responsive supply chains Agile supply chains
Risk-hedging supply (Evolving chains Process)
Ref. Lee, California Management Review, Spring 2002
How CRM Works
LOYAL CUSTOMERS •Better responsiveness to customer needs Relationship •Increased customer satisfaction • increased ARPU* • Stronger brand
attitude
• less price sensitive • reduce customer churn
CRM Program
Customer Database • increased ARPU* • cost reductions Data Mining Cross-selling Better Target Marketing • more targeted communications • new customer insights
* ARPU = average revenue per user
Market Research
• early warning system
Eight Steps to Transforming Your Organization ( 1 of 2)
Establishing a sense of urgency
Examining market and competitive realities Identifying and discussing crises, potential crises, or major opportunities
1 2 3 4 5
Forming a Powerful Guiding Coalition
Assembling a group with enough power to lead the change effort Encouraging the group to work together as a team
Creating a Vision
Creating a vision to help direct the change effort Developing strategies for achieving that vision
Communicating the Vision
Using every vehicle possible to communicate the new vision and strategies
Teaching new behaviors by the example of the guiding coalition
Empowering Others to Act on the Vision
Getting rid of obstacles to change Changing systems or structures that seriously undermine the vision Encouraging risk taking and nontraditional ideas, activities, and actions
Eight Steps to Transforming Your organization ( 2 of 2 )
Planning for and Creating Short-Term Wins
Planning for visible performance improvements Creating those improvements Recognizing and rewarding employees involved in the improvements
6 7
8
Consolidating Improvements and Producing Still More Change
Using increased credibility to change systems, structures, and policies that don’t fit the vision Hiring, promoting, and developing employees who can implement the vision Reinvigorating the process with new projects, themes, and change agents
Institutionalizing New Approaches
Articulating the connections that new behaviors and corporate success
Developing the means to ensure leadership development and succession
CUSTOMER INTERFACE
CORE STRATEGY
STRATEGIC RESOURCES
VALUE NETWORK
Fulfillment & Support Information & Insight Relationship Dynamics Pricing Structure
Business Mission Product/Market Scope Basis for Differentiation
Core Competencies Strategic Assets Core Processes
Suppliers Partners Coalitions
EFFICIENT
/
UNIQUE
/
FIT
/
PROFIT BOOSTERS
Ref: LEADING THE REVOLUTION, Gary Hamel
GENERAL STRATEGIC GROUPS
by Henry Mintzberg
• • • • • • • •
•
• •
Niche Players: highly differentiated, usually by quality or design, with narrow scope core business like the Economist magazine Pioneers: very focused scope, highly innovative designs, first movers as in the origins of Apple computers or certain film companies Local Producers: undifferentiated strategies in particular geographic niches, like the corner gas station or the national post office Dominant firms: “heavy” cost leaders, whether resource producers upstream or mass marketers further down, with wide scope and often vertically integrated, like General motors Me-too firms: like dominant firms but not dominant, with copycat strategies Worldwide replicators: heavy on marketing, producing, and selling in individual markets around the world, according to formula like Coca-Cola or McDonald’s Professionals: providing established professional services to customers, such as consulting, engineering and accounting firms Thin producers: filling huge occasional contracts for customer, usually anywhere in the world, involving extensive design innovation and complex technology, like Boeing and an Airbus Rationalizers: so-called “global firms” that distribute production “mandates” around the world while selling to large segments on a wide geographic basis like an IBM or an IKEA Crystalline diversifiers or network firms: highly diversified, with wide scope and many producers differentiated by design, mostly created through internal development around core competencies, as in 3M Conglomerates: often made up of unrelated diversification by acquisition of dominant firms
Brand Revitalization Strategies
Refresh Old Sources of Brand Equity Create New Sources of Brand Equity
Expand Depth and Breadth of Awareness and Usage of Brand
Improve Strength, Favorability, and Uniqueness of Brand Associations
Increase Quantity of Consumption (How Much)
IncreaseFrequency of Consumption (How Often)
Bolster Fading Associations
Neutralize Negative Associations
Create New Associations
Identify Additional Opportunities to Use Brand in Same Basic Way
Identify Completely New and Different Ways to Use
Retain Vulnerable Customers
Recapture Identify Lost Neglected Customers Segments
Attract New Customers
REF : Keller,CALIFORNIA MANAGEMENT REVIEW Vol. 41 , No . 3
Customer Retention Programs
Frequency/Loyalty Programs
Customer Service Customer Relationship Management: Satisfaction Rewards Programs
Customization
Community Building
Ref: A framework for CRM, Russell S. Winer
Customer relationship management model
Stage 4
Stage 3
Stage 2 Customer Repeat retention & customers customer loyalty Customer acquisition One-time purchase
Trust
Stage 1
Life value management
Customer attraction
Loyalty
Ref: Global e-Commerce, Ali Farhoomand with Peter Lovelock
Generic Roles of National Organizations
High
Black Hole
Strategic Importance of Local Environment
Strategic Leader
Implementer
Low Low
Contributor
High Level of Local Resources and Capabilities
REF:MANAGING ACROSS BORDERS THE TRANSITIONAL SOLUTION BY Christopher Bartlett & Sumantra Ghoshal
Companies must redefine their cores
New economic model
Frontal assault on the core Replace or restructure the core
Historic economic model
Shift to new boundaries
Core business definition
Ref: “Profit from the core”, by Chris Zook and James Allen of Bain & Co.
New business definition
The Attribute Map Defined Products and Services
Customer Attitude Attribute of Product or Service, Relative to Competing Offering Basic Positive Nonnegotiable
Performance at least as well as competition
Discriminator Differentiator
Performance better than competition where it counts
Energizer Exciter
Performance better than competitors
Negative
Tolerable
Performance no worse than competitors
Dissatisfier
Performance below the level of competitors
Enrager
Must be corrected at any cost (to capitalize on competitors’ negatives)
Neutral
So what?
Dose not affect the purchasing decision in a meaningful way
Parallel
Influences segment attitudes but is not directly related to product or service performance
Ref: THE ENTREPRENUURIAL MINDSET, Rita Gunther McGrath, Ian MacMillan
Hierarchy of Competencies: What Consumers Are Really Saying About How They Want to Interact with Companies?
Attributes
LEVEL
III.Consumer Seeks the Company (Dominate)
ACCESS
Give me a solution; help me out in a bind
EXPERIENCE
Establish intimacy with me by doing something no one else can. Care about my needs and me.
PRICE
Be my agent; let me trust you to make my purchases
PRODUCT
Inspire me with an assortment or great products I didn’t know about. Be dependable in your selection and in stock position, so I can rely on you when I’m in a bind. Be credible in your product and service offerings.
SERVICE
Customize the product or service to fit my needs.
II.Consumer Prefers the Company (Differentiate)
Make the interaction convenient for me.
Be fair and consistent in your pricing. I’m not necessarily after the lowest price. Keep the prices honest; don’t jack them up or offer big savings when there are none. Be inconsistent, unclear, or misleading in your pricing.
Educate me when I encounter a product or a situation I don’t understand. Accommodate me; bend over backward sometimes to show me you care. Give me an experience I’d just as soon forget; give me a reason to tell my friends and relatives to stay away.
I.Consumer Accepts the Company (Operate at Par)
Make it easy for me to find what I need, get in and out in a hurry.
Respect me; treat me like a human being.
Consumer Underworld
Block my way, hassle me, keep me waiting, make it hard for me to get in and out.
Dehumanize me; disrespect me; ignore my needs
Offer me poor quality merchandise and services that I can’t use.
Ref: They Myth of Excellence; Fred Crawford & Ryan Mathews
Strategic Marketing Process
Market Situation Analysis
Analyzing markets Market segmentation Analyzing competition Marketing information systems and research
Implementing and managing marketing strategy
Designing effective organizations Marketing strategy implementation and control
Designing marketing strategy
Market targeting and positioning strategy Marketing strategies for selected situations Planning for new products
Marketing program development
Product portfolio strategy Distribution Strategy Pricing strategy Promotion strategy
Philip Kotler, Marketing Management
Competitive-strengths matrix (1 of 2)
Rate the competitor in each of the six areas using the following
5 excellent/superior 4 very strong/competitive 3 adequate/average 2 weak/uncompetitive 1 very weak
Area
Product Manufacturing
Scale
1
2
3
4
5
Sales and Marketing Finance
Management
Corporate culture
Competitive-Strengths matrix
Competitive Strategy Offensive Flanking X
(2 of 2)
Position Leader Strong Contender Weak Contender Small Fry
Defensive X
Guerilla
X
X
X X
REF: RIES & TROUT, " MARKETING WARFARE "
All industries experience life cycle.The life cycle may conveniently be divided into stages.The rules of the game (key success factors) and competitor strategy change from stage to stage (1 of 3)
Embryonic Growth Maturity Aging
Unit Demand
Maturity
(2 of 3)
Characteristics
Introduction
Low Sales High cost per customer Negative Innovators Few
Growth
Rapidly rising sales Average cost per customer Rising profits Early adopters Growing number
Maturity
Peak sales Low cost per customer High Profits Middle Majority Stable number starting to decline Maximize profit while defending market share
Decline
Declining sales Low cost per customer Declining Profits Laggards Declining number Reduce expenditures and milk the brand
Sales Costs Profits Customers Competitors Marketing Objectives
Create Product awareness and trial
Maximize market share
Strategies Product Price
Distribution Advertising Sales Promotion
Offer a basic product
Use cost plus Build selective distribution Product awareness to adopters/dealers Heavy promotion to entice trial
Product extensions,service, warranty Price to penetrate market Build intensive distribution Awareness/interest in the mass market Reduce to profit from heavy demand
Diversify brands and models Phase out weak items Price to match or best Cut price competitors Build more intensive Go selective;phase out weak outlets distribution Stress brand differences Reduce to needed to and benefits retain hardcore loyals Increase to encourage Reduce to minimum brand switching
Situation Analysis
(3 of 3)
The Strategic condition of a business is described by the combination of its competitive position and the maturity of its industry.Strategic condition determines the number of choices available to competitors.
Maturity Stage
Embryonic Growth Mature Aging
Leading
Strong
Competitive Position
Favorable Tenable Weak
Westney & Goshal, Sloan Working Paper, 1988
Synchronized Supply Chain
Business to Business
Configuration
Joint Capacity Investments Planning Collaborative Supply Chain Planning Execution EDI Web Order Entry Web Procurement
Business to Consumers Business to Business
Business to Business
Web Data Feeds From Suppliers, Customers
Buy
Make
Move
Sell
Ref: Dr. Masud Arjmand and Stuart Roach. Accenture
THE VALUE NET
CUSTOMERS
COMPETITORS
COMPANY
COMPLEMENTORS
SUPPLIERS
Ref: Co-opetition: Adam M.Brandenburger & Barry J.Nalebuff
Four Stages of Supply Chain Optimization
INTERNAL Sourcing & Internal Logistics I Excellence II
Driver
Benefits
EXTERNAL Network Industry Construction III Leadership IV
Business unit leaders
Best partner performance
VP Sourcing CIO/supply (under pressure) chain leader
Leveraged savings Inventory, logistics, freight, order fulfillment Teaming, functional excellence Prioritized improvements across network Process redesign, systems improvement Benchmarks, best practice, activity - based costing Expanded levels
Management team
Network advantage, profitable revenue
Focus
Forecasting, planning, Consumer network customer services, inter-enterprise Metrics, database, mining, electronic commerce Intranet, Internet, Virtual Information system Full Enterprise Demand-supply linkage Global Market Joint Venture Network processing
Tools
Action Midlevel Total organization Area organization Guidance Cost data, Process mapping Advanced cost success funding models, differentiating processes Model None Supply-chain Inter-enterprise intra-enterprise Alliances Supplier Consolidation Training Team Best Partner Leadership Formal Alliance Partnering
Ref. : Charles C. Poirier, “ Advanced Supply Chain Management,”Berrett-Koehler Publishers,Inc,California
MARKET ATTRACTIVENESS VS BUSINESS STRENGTH
MARKET ATTRACTIVENESS
High Medium Low Build Selectively Limited Expansion Divest
Invest to High Protect Build BUSINESS Selectively Build Medium Selectively Manage for Earnings STRENGTH Manage for Low Protect & Refocus Earnings
McKinsey & GE
Planning Schools of Thought
Design School Theme
“Capture Success” Strategic planning is a conceptual process Invention of strategy by senior managers
“Selection based “Analysis will provide synthesis” on calculation”
Strategic Planning is a formal process Molding of strategy through policies and methodologies Strategic planning is an analytical process Selection of generic strategic positions •Provides centralized assessment of core competencies
Planning School
Positioning School
“Learn over time”
Learning School
“Bargain and negotiate” Strategic planning is a power process
Political School
Core Belief
Strategic planning is an emergent process
Behavior
Refining and Negotiating reconciling strategy through strategy through power and past experiences politics •Adaptive to changing organizational needs •Promotes needed change blocked by established forms of influence •Direction may be driven by parochial interest rather than common interest
Primary Strength
•Provides top management vision of strategic direction
•Complexities may not be easily conceptualized atop the organizational hierarchy
•Provides structure, promotes the activity of strategic planning
•Can become dysfunctionally complex
Primary Weakness
•Can become too •May promote strategic narrowly drift,requires focused significant resources to implement
SEGARS AND GROVER , Strategic Information Systems Planning Information Systems ResearchVol. 10,No. 3,September 1999
Positioning for Emerging-Market Companies
Competitive Assets Customized to home market Transferable abroad Dodger Contender
Pressures to Globalize in the Industry
High
Focuses on a locally oriented link in the value chain, enters a joint venture, or sells out to a multinational Defender
Focuses on upgrading capabilities and resources to match multinationals globally, often by keeping to niche markets Extender Focuses on expanding into markets similar to those of the home base,using competencies developedd at home.
Low
Focuses on leveraging local assets in market segments where multinationals are weak
.
Ref: Dawar And Frost
The E-business Value Transformation Matrix
Product And Market Transformation Reconceive the product/service
Business Process Transformation
Unbundle and outsource processes
Industry Transformation
Redefine the basis of competition
Redefine the value proposition
Assume another role - E-business storefront - Infomediary - Trust intermediary - E-business enabler - Infrastructure provider
Compress the value delivery system Explode the price/performance ratio
Become the channel enabler
Move the product up the food chain Separate the function from the form
Redraw industry boundaries Break the unbreakable rules
Ref: “Net Ready” – AMIR HARTMAN & JOHN SIFONIS With JOHN KADOR
PRODUCT HIERARCHY FOOD CHAIN
Transformative experience
Experience Value-Added Services
Product with Differential Attributes
Commodity
Ref: “Net Ready” – AMIR HARTMAN & JOHN SIFONIS With JOHN KADOR
Key Features of B-Web Types
Agora Aggregation Selection and convenience Optimization of selection, organization, price, convenience, matching, and fulfillment Buyer Value Chain Process integration Design and delivery of an integrated product or service that meets a specific set of customer needs Value driver Alliance Creativity
Main theme
Dynamic pricing Liquidity converting goods into a desirable price
Distributive Network Allocation/ distribution Facilitate the exchange and delivery of information, goods, and services Sender/ recipient Network optimization Visibility and transparency Distribution
Value proposition
Creative collaboration in aid of a goal shared across a community of contributors
Customer role Knowledge focus
Market player
Timing Market intelligence
Contributor
Key process Examples
Price discovery Yahoo classifieds eBay Priceline AdAuction NASDAQ MetalSite FreeM rkets
Market segmentation Supplier offerings Fulfillment Needs matching Amazon.com Chemdex HomeAdvisor Webvan E*Trade Travelocity WSJI
Innovation Supply -chain management
Community Creativity Standards and roles Innovation
Product design Supply -chain management Cisco Systems Dell Computer General Motors Celestica Bidcom
America Online NetNoir Linux MP3 Wintel
Enron UPS AT&T Wells Fargo Internet
Ref: Tapscott, Ticoll, and Lowy
MODEL OF EC CONSUMER BEHAVIOR
Individual Characteristics Environment Characteristics Social, family, communities
Age, gender, ethnicity, education, lifestyle, psychology, knowledge, values, personality
Stimuli
Marketing Price Product Others
Economical Political Cultural
Buyer’s Decisions
Buy or not What to buy
Promotion Technological
Quality
DecisionMaking Process
Where to buy (vendor) When to buy How much to spend Repeat purchases
Vendors’ Controlled Systems
Logistics support Payments, Delivery Technical support Web design, intelligent agents Customer service FAQs, e-mail, call centers, one-toone
