What’s Happening?! Federal Reserve comments regarding interest rates spooked the stock market. An...

What’s Happening?!What’s Happening?!

Federal Reserve comments regarding interest rates spooked the stock market.

An increasing number of TV stations that broadcast in digital e multicasting which further increases the number of available channels.

Superbowl Sunday will bring the latest in colossal TV ads.

San Jose mayor had a mild stroke while delivering his annual state of the city address.

Revised Course SyllabusRevised Course Syllabus

Has been updated on the course web page.Has been updated on the course web page.

Feb. 10 is not Advisement Day!

Feb. 5 – Section I and II are due.

Feb. 12 – Midterm Exam

Feb. 19 – Bob Sanguedolce, eBay

Mar. 9 – Student ATP presentations

Mar. 11 – Final class

Mar. 16 – Final exam

Chapter 6 SummaryChapter 6 Summary

Business Vision

Chapter ObjectivesChapter Objectives

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

Understanding the significance of the vision process.

Remembering that vision triggers the entire business and information technology management process

What is a Vision?What is a Vision?

A photograph of the future

It must be realistic and credible -- and most certainly attractive to the organization

Concrete and easily understood ideas about the long-range future of the business

What Must Be AccomplishedWhat Must Be Accomplished

– Establish a clear vision of the future

– Provide a basis for sharing values and views

– Send a message regarding the importance of the vision process throughout the entire organization to gain consensus and momentum

Sensing Opportunity

Vision

Strategy

Tactics and Business Plan

Agreement &Commitment

Implementation(Action)

Feedback

The Vision to ActionProcess

Vision UncertaintyVision Uncertainty

The dynamics of the marketThe dynamics of the market Rapidly changing technologiesRapidly changing technologies The logic and need to address changing The logic and need to address changing

employee values and traditional methodsemployee values and traditional methods The shift from old regulatory practices to The shift from old regulatory practices to

new practices in many industriesnew practices in many industries

Customer ServiceCustomer Service

Frequently Drives the Vision!Frequently Drives the Vision!

For USAA, General McDermott’s four step For USAA, General McDermott’s four step process:process:– AutomationAutomation– Employee attritionEmployee attrition– Improved job trainingImproved job training– Decentralized decision making through Decentralized decision making through

empowering employeesempowering employees

Role and Contribution of ISRole and Contribution of IS

A horizontal integration of applicationsA horizontal integration of applications An executive partnershipAn executive partnership Technology experimentation and Technology experimentation and

assimilationassimilation Leveraging their information systemsLeveraging their information systems Strategic architectureStrategic architecture

Whirlpool’s Global VisionWhirlpool’s Global VisionTaking a company’s best capabilities and leveraging them in its Taking a company’s best capabilities and leveraging them in its

worldwide operationsworldwide operations

Stakeholder Value

Measurement

& Results

Customer

Satisfaction

Strategic

PlanningFact-Based

Management

Customer Satisfaction

People

Commitment

Values

Vision

WorldwideExcellence

System

Value CreatingObjectives

WhirlpoolPeople Quality Process

& Products

Leadership

Growth & Innovation

TotalQuality

Where

Way

What

How

ConclusionsConclusions Successful companies are the result of Successful companies are the result of

good leadership.good leadership.

Talented leadership is demonstrated in Talented leadership is demonstrated in the following forms:the following forms:– Determining the direction of the business.Determining the direction of the business.– Operational efficiency and effectiveness.Operational efficiency and effectiveness.– Implementation and maintenance of a well Implementation and maintenance of a well

directed information system.directed information system.

Possible Exam QuestionsPossible Exam Questions

1.1. What factors influence the creation of a What factors influence the creation of a vision?vision?

2.2. What impact does a vision have on What impact does a vision have on information systems?information systems?

Chapter 7 IntroductionChapter 7 Introduction

Implementing a Vision: Strategy, Tactics, and Implementing a Vision: Strategy, Tactics, and Business PlanBusiness Plan

Chapter ObjectiveChapter Objective

Provide an understanding of how a company Provide an understanding of how a company makes the transition from vision to action.makes the transition from vision to action.

Chapter 7 In Just One Slide!Chapter 7 In Just One Slide!

Vision:Vision: What the company wants to look like in What the company wants to look like in the futurethe future

Strategy:Strategy: Ideas on how to accomplish the vision, Ideas on how to accomplish the vision, by doing an internal and external analysis of the by doing an internal and external analysis of the company.company.

Tactics:Tactics: The specific, time-oriented method of The specific, time-oriented method of implementing the decided strategies.implementing the decided strategies.

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

The Four Components to Implement a VisionThe Four Components to Implement a Vision

The Three Components of a New StrategyThe Three Components of a New Strategy

Vision

External Assessment

Internal Assessment

A New StrategyA New Strategy

Elements of a Business StrategyElements of a Business Strategy Competitive framework:Competitive framework: What market are you in? How What market are you in? How

big is it? Who are your competitors, and what are their big is it? Who are your competitors, and what are their strategies?strategies?

Market target:Market target: What type of customer are you selling to? What type of customer are you selling to? What are their needs, attitudes, and priorities?What are their needs, attitudes, and priorities?

Basis for perceived competitive superiority:Basis for perceived competitive superiority: How do your How do your customers define your product or service as superior? customers define your product or service as superior?

Key profit drivers:Key profit drivers: What makes your product or service What makes your product or service profitable?profitable?

Product portfolio:Product portfolio: Interrelating a product or service with Interrelating a product or service with the above four points.the above four points.

Breakdown Relative to New Strategies:Breakdown Relative to New Strategies:

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysis

Vision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Internal Analysis

External Analysis

Vision:

Tactics and Their ImplementationTactics and Their Implementation

StrategiesStrategies are passed are passed down from Senior down from Senior Management to various Management to various employees in the employees in the organization.organization.

These employees use These employees use their various skills to their various skills to implement these implement these strategies. The strategies. The implementation is called implementation is called a a tactictactic..

Senior Management

Strategy ImplementationStrategy Implementation

Visionand MacroStrategies

Empowered Implementers

MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

Business PlanBusiness Plan

The business plan could be a very broad subject, The business plan could be a very broad subject, but here is one possible explanation:but here is one possible explanation:

A business plan can be formed by analyzing the A business plan can be formed by analyzing the successful tactics implemented by a company.successful tactics implemented by a company.

The tactics provide details as to how the company The tactics provide details as to how the company should allocate its resources.should allocate its resources.

Summary of Progressive Summary of Progressive Corporation’s StrategiesCorporation’s Strategies

Change the definition of the business and financial Change the definition of the business and financial objectives to ensure long term success.objectives to ensure long term success.

Change the primary market segment they would serve.Change the primary market segment they would serve.

Streamline internal operations.Streamline internal operations.

Create new information systems to accommodate their Create new information systems to accommodate their new business strategies.new business strategies.

ConclusionsConclusions

Information systems can be a competitive resource as long as they support the right business strategies.

To develop a strategy, a company should decided what things are worth doing, and most importantly, these things should be achieved.

Chapter 7 Chapter 7

Implementing a Vision:

Strategy, Tactics and Business Plan

If we know where we are and something about how we got there, we might see where we are trending--and if the outcomes which lie naturally in our course are unacceptable,to make timely changes.

Abraham Lincoln President of the United States

Primary Business ChallengesPrimary Business Challenges

• Deciding what things are worth doing.

• Getting things done!

If the strategy is a hammer, the tactic is a nail. The actual end results are accomplished by the nail. If the nail isn't hammered correctly then the battle is lost. Sometimes the hammer also misses the nail.

When in DoubtWhen in Doubt

Whether dealing with vision, strategies or tactic think customer!

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

Also the importance of doing its homework on its competitors.

Defining the Three Key Defining the Three Key ElementsElements

Vision: Identifies what the organization wants to look like at some logical point in the future.

Strategy: How a company will achieve the long-term goal of the vision.

Tactics: More specific time-oriented, measurable ways to make a vision a reality.

Business Strategies!?Business Strategies!?

How important are they, really?

Do business strategies really make a difference between success and failure of a company?

Business StrategiesBusiness Strategies

Every company has a competitive strategy, either explicit or implicit.

The strategy may have been developed through a planning process or it may have evolved through the activities of various functional departments.

Left on its own, each functional department will inevitably pursue approaches dictated by its professional orientation and/or the incentives of those in charge.

The sum of these departmental approaches rarely produces the best strategy for the company.

Business StrategyBusiness Strategy

There are significant benefits to be gained through a process to formulate strategies that insure that at least policies, if not actions of functional departments, are coordinated and directed at a common set of goals.

Developing a competitive strategy involves creating a process on how a company is going to compete, what its goals should be and what policies are needed to achieve those goals.

Need to ask the following Need to ask the following questions:questions:

1. What is driving competition in our industry or one that we might enter?

2. What actions are competitors likely to take and what is the best way to respond?

3. How will our industry evolve over time?

4. How can we be best positioned to compete in the long run?

Strategy Consistency?Strategy Consistency?

1. Internal Factors

2. Resource Factors

3. Environment Factors

4. Communication and Implementation Considerations


Internal Factors:

Are the goals achievable?

Do key operating policies address the goals?

Do key operating policies reinforce each other?

Resource Factors:

Do the goals and policies match the resources available to the company relative to competitors?

Does the timing of the goals and policies reflect the company’s ability to change?


Environment Factors:

Do the goals and policies exploit industry opportunities?

Do the goals and policies deal with industry threats that are possible with available resources?

Does the timing of the goals and policies reflect the ability of the environment to absorb the planned impact.

Are the goals and policies consistent with societal concerns?


Communication and Implementation Considerations:

Are the goals understood by the implementers?

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

Is there sufficient management capability and availability to assure effective implementation?

Competitive Strategy ProcessCompetitive Strategy Process

A. What is the company doing now?

Current strategy?

Assumptions about the company’s relative position, strengths and weaknesses, competitors and industry trends.


B. What is happening in the business environment (industry).

Validity of industry opportunities and significance of threats.

Key factors for competitive success.

Capabilities and limitations of existing and potential competitors.

Company strengths and weaknesses relative to present and future competitors?


C. What should the company do?

Test the assumptions and strategy.

Consider alternative strategies.

Chose the strategy that best relates to the company’s situation relative to external opportunities and threats.

IEAIEA

Internal

External

Action

Progressive CorporationProgressive Corporation

1988 Performance• Record Revenue

• Record Earnings

• Outstanding Company Culture

• Highly Respected Business Leader

• Well Regarded Company

• Could Things Possibly Be Better?

Progressive CorporationProgressive Corporation

1989 Impact• Voters Passed Proposition 103 in

California Resulting in $52 Million Being Put into an Escrow Account.

• Allstate Gained a Larger Market Share in Progressive’s Niche Market for the First Time.

Progressive Corp. BusinessProgressive Corp. Business

Progressive decided that it was really

in the business of reducing human

trauma and economic costs of auto

accidents.

Progressive Corp. VisionProgressive Corp. Vision

We seek to be an excellent, innovative,growing and enduring business by reducingthe human trauma and economic costs of auto accidents in cost-effective and profitableways that delight customers.

Progressive’s New Business StrategiesProgressive’s New Business Strategies

• A New Definition of the Business.

• Establish Lower Profit Margin Objectives.

• Pursue a Broader Auto Insurance Market.

• Provide Consumer Access to Policy Rates.

• Provide Policy Information to Customers.

• Guarantee Policy Renewal.

• Utilize Multiple Distribution Channels.

• Promote Company Identity.

• Curtail Diversification.

• Reduce Operating Expenses.

• Assign Business Process Ownership.

• Establish a New Employee Compensation

System.

Progressive’s New Business StrategiesProgressive’s New Business Strategies

IS Support of New StrategiesIS Support of New Strategies

• Express Quote Service.

• Immediate Response System.

Vision, Customer Value Vision, Customer Value Proposition, Core Values and Proposition, Core Values and

ObjectivesObjectives

Progressive Vision:

We seek to be an excellent, innovative, growing and enduring business by cost effectively and profitably reducing the human trauma and economic costs of auto accidents and other mishaps, and by building a recognized, trusted, admired, business generating brand.

We seek to earn a superior return on equity and to provide a positive environment which attracts quality people who develop and achieve growth plans.

ProgressiveProgressiveCustomer Value Proposition:

Our customer value proposition provides a litmus test for customer interaction, relationships and innovation.

Fast, Fair, Better

That’s what you can expect from Progressive. Everything we do recognizes the needs of busy customers who are cost-conscious, increasingly savvy about insurance and ready for easy, new ways to quote, buy and manage their policies, including claims service that respects their time and reduces the trauma and inconvenience of loss.

ProgressiveProgressive

Core Values:

Progressive’s core values are pragmatic statements of what works best for us in the real world.

They govern our decisions and behavior.

We want them to be understood and embraced by all Progressive people.

Growth and change provide a new perspective, requiring regular refinement of core values.

Progressive Core ValuesProgressive Core Values

Integrity We revere honesty. We adhere to high ethical standards, report precisely and completely, encourage disclosing bad news and welcome disagreement.

Golden Rule We respect all people, value the differences among them and cope with them in the way we want to be dealt with. This requires us to know ourselves and to try to understand others.

Objectives We strive to communicate clearly Progressive’s ambitious objectives and our people’s personal and team objectives. We evaluate performance against all these objectives.

Progressive Core ValuesProgressive Core Values

Excellence We strive constantly to improve in order to meet and exceed the highest expectations of our customers, shareholders and people. We teach and encourage our people to improve performance and to reduce the costs of what we do for customers. We base our rewards on results and promote on ability.

Profit The opportunity to earn a profit is how the competitive free-enterprise system motivates investment to enhance human health and happiness. Expanded profits reflects our customers’ and claimants’ increasingly positive view of Progressive.

Peter LewisPeter Lewis

Currently Chairman of the Board

“We sell speed, not insurance.”

Glenn Renwick, President and Chief Executive Officer

Raymond Voelker, Chief Information Officer

IS Exec Identity CrisisIS Exec Identity Crisis

“My world collapsed recently during a strategic planning meeting between the information systems organization and our marketing department.”

“How can we in IS help you to realize your goals?” asked the IS Director. This seemed like a good open-ended question, and I was waiting for the vice-president of marketing to embrace IS in his confidence. We were prepared to act as a full business partner with the marketing department.

“Beyond capacity planning for your computers, I don’t know how you can help. I’m not even sure what your role is in all of this” replied the VP of Marketing.

Information Technology ImpactInformation Technology Impact

Information Technology

Work

OrganizationPeople

Information



Work

OrganizationPeople

Information10 day

information float

Route Salesman Regional Competitors

Increased complexity for route salesman and plants

Semi-automated batch system (out-dated)



Work

OrganizationPeople

InformationReduced

information float to 24

hoursRoute SalesmanAccount SpecialistMerchandiser

Decentralized Marketing Organization

Increased complexity for route salesman and plants

Communications Network and Hand-held Computer

Yum! BrandsYum! Brands

KFC

Pizza Hut

Taco Bell

Long John Silver

All American Food (A&W)

Created as Tricon Global Restaurants on October 6, 1997 as a spin off from Pepsi.

Yum! BrandsYum! Brands

The world’s largest quick service restaurant company with nearly 33,000 units in more than 100 countries.

36% are outside the US

Worldwide Units - Dec. 2002

0 10,000 20,000 30,000 40,000

Yum!

McDonalds

Subway

Burger King

Wendy's

Domino's Pizza

Diary Queen

2002 Financial Performance2002 Financial Performance

• Realized $7.7 billion in total revenue which was a 12% growth with $866 million from franchise and license fees

• Operating earnings of $1 billion was a per share growth of 19%.

• Expanded the international unit portfolio by opening 1, 051 new units.

• Increased international operating profits by 22%.

Long Term GoalsLong Term Goals

1. To be the premier global restaurant company.

2. Transform the Quick Service Restaurant industry with multi-branding.

3. Become the best restaurant company investment.

Business StrategiesBusiness Strategies

1. Drive International Growth

2. Multi-brand Great Brands

3. Improve Operations of Brand Portfolio with Customer Mania

International GrowthInternational Growth

In 1992 McDonalds had 4,000 international restaurants. Today it has over 16,000 with a $1 billion profit from these operations.

Yum! has 11,800 (6,800 KRC and 4,400 Pizza Hut) with nearly $400 million in international profit.

Burger King is third with a profit of $50 million.

International Sales

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

Asia-Pacific

Europe, South Africa

Americas

Great China

International Growth FocusInternational Growth Focus

Seven countries but China, UK, Mexico and Korea will receive most of the capital investment with an objective of opening 1,000+ new international units.

China currently has 800 KFCs and 100 Pizza Huts with plans to open 200 new units per year.

65% of this growth will be through joint venture partners and franchises.

International ChallengesInternational Challenges

1. Customer food preference and taste.

2. Standard of living—product cost.

3. Currency fluctuations.

4. Brand strength and unit consistency.

5. Distribution system.

6. Building an international team for the company.

Multi-brandingMulti-branding

Typically, sales rise at least 20% when a second brand is added to another Yum! brand. Has added $100,000 to $400,000 to a unit.

Multi-branding gives customers more choices and variety.

McDonalds has been the envy of this industry since its units average $1.6 million a year (almost twice that of Yum!)

Pasta Bravo will be tested as a multi-brand with Pizza Hut.

40% of multi-branding is being done by franchisees.

US Quick Service Restaurant Market Share

0% 20% 40% 60% 80%

Mexican

Chicken

Seafood

Pizza

Improving OperationsImproving Operations

Training 840,000 employees each quarter on how to be customer maniacs.

Restaurant Units

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

Company

Affliates

Franchisees

Licensees

InternalAssessment

ExternalAssessment

The Three Components of a New Strategy

Vision

A New Strategy Figure 7-1

Strategy ConsiderationsStrategy Considerations

• Competitive Environment

• Market Target

• Basis for Perceived Competitive Advantage

• Key Profit Drivers

• Product and/or Service Portfolio

Hello, Porter Competitive Model!

Additional ConsiderationsAdditional Considerations

• Whether to be an industry leader or follower.

• How aggressively to implement a new strategy.

• Determining people skills and availability.

• Determining that funding is available.

• Not violating factors ranging from laws to company values.

• Balancing short and long term objectives.

• Producing positive results within the scope of the mission and

vision of the business.

Strategy-to-Tactics Strategy-to-Tactics ImplementationImplementation

Defining the range of business that the company will pursue.

Responding in an appropriate and timely manner.

Delegating of responsibilities for formulating specific strategies to people who are closer to the demands of the customer and market.

Managing for ResultsManaging for Results

• Objectives

• Authority

• Responsibility

• Training

• Motivation

• Performance

• Results

• Reward

Control

Figure 7-4

Senior Management

Strategy ImplementationStrategy Implementation

Visionand MacroStrategies


MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

Information NeedsInformation Needs

Senior Management


Emerging Opportunities and Threats

Internal Impact of Strategies and Tactics

External Impact of Strategies and Tactics

Performance Measurements

Figure 7-5

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysis

Vision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Strategic Management ProcessStrategic Management Process

Competitive AnalysisCompetitive Analysis

What drives the competitor?

Future Goals

At all levels of management and in multiple dimensions

What the competitor is doing and can do

Current Strategy

How the business is currently competing

Assumptions

Held about itself and the industry

Capabilities

Both strengths and weaknesses

Competitors Response Profile

Is the competitor satisfied with its current position?

What likely moves or strategy shifts will the competitor make?

Where is the competitor vulnerable?

What will provoke the greatest and most effective retaliation by the competitor?

SWOT AnalysisSWOT Analysis• Strength: A collective organizational competency,

asset or capability that enables it to achieve a high level of success.

• Weakness: A collective organizational competence, asset or capability that is competitively inferior and provides a vulnerability that can be exploited.

• Opportunity: A trend or event that could lead to a positive change in position if addressed by a strategic response.

• Threat: A trend or event that could lead to a negative change in position if not addressed by a strategic response. Source: The Art of Strategic Planning

for Information Technologies

SWOT AnalysisSWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Suggest strategies that should be tested against

Vision

Goals

Company Values

Financial Status

Cash Position

ROI Position

Societal Demands

Competition

Core Competencies

People Skills

Overall Resources

Strategies can be relatively simple. Implementation is often the major challenge.

A Logical ApproachA Logical Approach

• Find a tactic that will work.

• Build it into a strategy.

Employee downsizing, right-sizing or

dumb-sizing (take your choice)

should not be based solely on cost

cutting.

Smart SizingSmart Sizing

• Consistent with the vision and strategies of the organization.

• Help build future strengths of the company while streamlining or eliminating unnecessary processes and functions.

• A big of a price to pay for anything less than this.

Company InfrastructureCompany Infrastructure

• Data Management

• User Applications

• Voice Management

• Network Management

• Plan Process

• Financial Strategy

• Organization

Figure 7-7

Essential to Run a Business Essential to Run a Business

• Vision

• Strategy

• Tactics

The Importance of these Factors as Key Priorities Continues When People Are Empowered with More Authority and Responsibility

IT Based StrategiesIT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANTSTRUCTURALCHANGE

TRADITIONALPRODUCTSAND PROCESSES

Federal ExpressUSA TodayCharles Schwab

WhirlpoolXerox

BancOne Boeing Frito-Lay Wal-Mart

USAA L.L. Bean McKesson

Figure 7-6

Re-engineering Total QualityManagement

Right Sizing

Which Way Should the Arrows Go?Which Way Should the Arrows Go?

Business Visionand Strategies

ConclusionsConclusions

A strategy should often be kept relatively simple. Success relies on gaining understanding,

acceptance, and support by people within the company.

The strategy must accomplish its objectives by providing direct or indirect value to customers.

Information Systems can only be successful if it supports the right business strategies.

What’s Happening?! Federal Reserve comments regarding interest rates spooked the stock market. An...

Documents

Transcript of What’s Happening?! Federal Reserve comments regarding interest rates spooked the stock market. An...