InformationWeek Issue Jan. 27, 2003

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InformationWeek IssueJan. 27, 2003
CEO Visions 2003 Looking Beyond the
Storm www.Informationweek.com
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Who is paying federal taxes?
To be in the top 25 of all tax payers you need
to earn
52,965.
To be in the top 50 of all tax payers you need
to earn
26,415
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Who is paying federal taxes?
Percentiles Share of AGI of Fed.
Taxes Paid Top 1 19.5 36.2 Top
5 34.0 55.5 Top 10 44.9 66.5 Top
25 66.5 83.5 Top 50 86.8 96.0 Bottom
50 13.2 4.0
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Chapter 5 SummaryInformation Systems Can
Redefine Competitive Boundaries
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Section 1 The First Of Three Perspectives The
Business Environment

• Chapter 1 Business and Information Systems
  Management
• Chapter 2 Business Competitive Environment
• Chapter 3 Porter Competitive Model
• Chapter 4 Airline Industry Analysis
• Chapter 5 Information Systems Can Redefine
  Competitive Boundaries

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Networks Cross Company Boundaries to Reap Benefit

• Efficiency maximizing output while minimizing
  expense and unnecessary effort.
• Effectiveness creating a strong impression in
  the overall scheme of the business by broadening
  tasks, activities and even entire jobs.
• Competitive Advantage creating
  Interorganizational Systems through strategic
  alliances (extended enterprise) and links with
  customers.

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Alliances Provide Growth Opportunities

• Three major markets North America, Europe, and
  the Pacific Rim.
• Fight your competitor in your market or face the
  possibility of your competition fighting
  exclusively against you in your own market.

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Electronic Data Interchange

• Exchange of routine business transactions in a
  structured, computer-processable format.
• Logical extension of existing systems.
• Obstacles format incompatibility, timing
  windows, service cost, etc.
• EDI Value Added Networks support for electronic
  mailbox to address time windows, multiple routing
  paths, ensuring data format compatibility between
  systems

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E-mail Enabled Applications

• Non-simultaneous communication.
• Replaces traditional paperwork as forms are
  filled out and submitted via electronic mail.

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Possible Exam Questions

• What advise would you give to a company that is
  contemplating several new strategic alliances?
• How can information systems contribute to
  establishing successful strategic alliances?

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Chapter 6 Introduction
Business Vision
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What weve covered

• Course Overview
• Business Competitive Environment
• Porter Competitive Model
• Airline Industry Analysis
• Information Systems redefining competitive
  boundaries

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Whats next . . .
A Systematic Approach

• Section II Company
• Perspective
• Shown in the model are
• the business and IS
• factors that need to be
• addressed to successfully
• use information systems
• to gain a competitive
• advantage.

Vision Strategy Tactics Business Plan

• Competitive Options
• Roles, Roles and Relationships
• Redefine and/or Define
• Telecommunications as the Delivery Vehicle
• Success Factor Profile

Figure 1-4
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Primary Objective of Chapter

• To understand the important of establishing a
• well understood vision as the starting point in
• directing, posturing and running a business.

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The Vision Process

• To establish a clearly vision of the future
• To provide a basis for sharing values and views

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Uncertainties of a Vision

• The dynamics of the market (customers).
• Rapidly changing technologies that frequently
  offer new product life cycles.
• The logic and need to address changing employee
  values and traditional ways that work is done.
• The shift from the old to new regulatory
  practices in many industries.

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USAA

• Property and Casualty insurance and financial
  services institution based on membership of
  military personnel and their dependents.
• General Robert F. McDermott, CEO and President
  and his role of the business visionary

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Whirlpool Corporation

• The Worlds Largest Manufacturer and Marketer of
  Major Home Appliances
• David Whitwam, CEO in 1987. Initiated global
  vision in 1988

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Vision and Information Systems
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Conclusions

• 1. Leadership is a key factor in establishing an
• effective vision for an organization.
• 2. While accomplishing this can represent a major
  challenge, it can be a critically important thing
  to do to assure the long term success of the
  organization.

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Chapter 6

• Business Vision

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CEO Job Description
The primary job of a CEO is deal with the
long-term viability of the business.
Leaders combine vision with communication that
leads to a shared purpose.
A leader sets the vision which is different from
being a visionary.
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The essence of competitiveness is vision,
leadership and a hunger to succeed.
P. R. Vagelos Chairman and CEO Merck
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A Business Vision

• A vision is a photograph of the future.
• It is a self-image that deals with what the
  business wants to look like over the long range
  future.
• Business visions are realistic, credible and
  attractive to people within the organization.

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Jack Welch Vision for GE
His vision was for GE to become the most
competitive enterprise on earth.
His wanted to create a small company spirit in a
big company body, to build an organization out of
an old line industrial company that would be high
spirited, more adaptable, and more agile than
companies one-fiftieth the size.
He wanted GE to be a company where people dared
to try new thingswhere people felt assured in
knowing that only the limits of creativity and
drive, their own standards of personal
excellence, would be the ceiling on how far and
how fast they move.
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Larry Ellison Vision for Oracle
To be the world leader in providing software
applications over a network and hardware designed
and priced to serve those needs.
Ellison suggests that the software industry as we
know it today will vanish and be replaced by a
service industry.
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Microsoft Vision
Empower people through great software, anyplace,
any time and on any device.
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Values Beliefs Principles
C u l t u r e
Mission Goals
Vision
Strategies
Tactics
Objectives and Measurements
Authority and Responsibility
Business Plan
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The Vision Thing

• Organizations are frequently brought to crisis
  by
• conflicts over basic issues of mission, values,
  and
• vision.
• Without these basic agreements in place, no
• organization is truly viable at least over a long
  term.

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Mission, Vision and Values
Mission, vision and values are the glue that
holds an organization together. They describe
what you're trying to do, how you want to go
about it, and where you're headed. Knowing
these things helps to keep your organization on
track. These crucial factors provide a
yardstick to measure present performance and
plans against aspirations.
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Mission, Vision and Values

• MISSION is the reason an organization exists.
• The founders' intentions.
• What they intended to achieve by starting the
  organization.
• This must be reexamined and refreshed
  periodically if an
• organization is to remain dynamic.
• .

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Vision

• VISION is what keeps people within an
  organization moving forward,
• even against discouraging odds.
• Vision is the most powerful motivator in an
  organization.
• If it's vivid and meaningful enough, people can
  do unbelievable things to
• bring it to realization.
• But if it's lacking, no amount of resources will
  be able to get people to
• make any kind of a concerted effort.

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Values (Culture)
VALUES manifest in everything you do as a group,
not only your public programs, but also how you
operate. One organization may identify access
as a primary value. When they plan programs,
they think foremost about how to remove the
barriers and encourage the widest possible
participation. Another group might value product
quality above all else. When they assign
budget priorities, they opt for expenditures
that improve quality above all others.
Articulating values provides everyone with
guiding lights, ways of choosing among competing
priorities and guidelines about how people will
work together.
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Gerstner and IBM
Lou Gerstner caused a stir two months after
becoming IBMs CEO when he declared at his major
significant press conference that the last
thing IBM needed was to proclaim a grand vision.

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Culture Change
Changing IBM's culture was Gerstner's most
challenging long-term task. Early in his
tenure, he told employees, We've lost 16
billion in the last three years Fortune
magazine says we're a dinosaur. Don't you think
we ought to change? It's pretty obvious what
we're doing isn't working."
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Gerstner Approach
Gerstner constantly asked managers, "What are
your customers telling you? Do you understand
your market? Have you segmented your market?"
He ran IBM like the customer that he used to
be. He believed that five years were required to
transform an enormous, far-flung organization
like IBM.
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Executive Vision
If a company has restructured where do they turn
for business performance and financial
improvement?
Job experience can easily count more than
intuition.
A broad grounding in a particular industry is a
prerequisite to successful direction setting.
Visionaries can draw a conceptual roadmap to some
imagined future.
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The most important thing that I have learned is
that the time for a business to go from chump to
champ to chump used to be two to three decades
and now it is five to seven years.
Bill McGowan Former CEO of MCI
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A Systematic Approach
Vision Strategy Tactics Business Plan

• Competitive Options
• Roles, Roles and Relationships
• Redefine and/or Define
• Telecommunications
• as the Delivery Vehicle
• Success Factor Profile

Figure 1-4
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A Shared Vision Positions IT
1. Achieve Strategic Synergy. 2. Put the Onus on
the Owners. 3. Leverage Learning. 4. Extend
Externally. 5. Chuck the Organization Chart. 6.
Indulge in Information. 7. Make a Bee-line for
Benefits.
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The Vision Trap1
Grand, abstract visions can be too inspirational.
The company may wind up making more poetry than
products.
Gerard H. Langeler President, Mentor Graphics
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Implementation (Action)
The Vision to Action Process
Agreement Commitment
Tactics and Business Plan
Strategy
Feedback
Vision
Sensing Opportunity
Figure 6-1
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Vision Examples

• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.
• Gil Amelio at National Semiconductor

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If Starting Today
Robert McDermott, USAA Jack Welch, General
Electric David Whitwam, Whirlpool Jeff
Bezos, Amazon.com Peter Lewis, Progressive Corp.
Charles Schwab, Schwab Co.
Michael Dell, Dell Computer Sam Walton,
Wal-Mart Stores Fred Smith, Federal Express
Meg Whitman, eBay Louis Gertsner, IBM Akio
Morita, Sony Lee Kuan Yew, Singapore, Inc.
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USAA

• Financial Services Company.
• Headquartered in San Antonio, Texas.
• A member owned association.
• Started by Army officers who had difficulty
  getting insurance.
• Historically managed by former military
  officers.
• Top-rated for customer service and financial
  performance.

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Information systems are strategic weapons, not
cost centers. Robert F. McDermott,
Former USAA CEO
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McDermott Leadership

• Increased assets from 207 million to 8.5
  billion.
• Grew customer base from 650,000 to 2.4 million.
• Significantly increased the level of customer
  service.
• Broadened the product base.
• Decreased the high annual employee turnover
  rate.
• Redefined the business from a property and
  casualty
• insurance company to a financial services
  organization.

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USAA Videotape
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USAA Vision 2000
An Events Oriented Organization
Member (Customer)
Needs
Wants
Key Points Security Quality
Asset of Life
Management
Supporting Insurance Consumer
Financial Systems Products
Services Services
Products
Products
Figure 6-2
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USAAs ultimate goal is to manage its customer
relationships and not its individual products.
How does this relate to information systems?
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USAA Products and Services
So integrated that members lose something if they
go elsewhere.
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USAA Business and IS Goals
1. Customer Convenient 2. Operator Efficient 3.
Cost Effective
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Information Systems Strategies

• Executive Partnership
• Strategic Architectures
• Technology Experimentation
• External Resource Leverage
• Technology Assimilation
• Horizontal Integration

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IT at USAA

• 28,000 workstations for 22,709 employees.
• 7 mainframe computers.
• 750 client server systems.
• Own and operate a communications company.
• 4,300 ATT Trunk Lines 94 million annual
  telephone calls representing 90 of business
  transactions.
• 1,300 Information Systems people. (ITCo)

12/31/99
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USAA Image Processing
Mainframe Computer
A P I
A P I
Folder Management Application
Inner Server
Storage Manager
Direct Access Storage Drive
Document Database Direct Access Storage Drive
API
Token Ring LAN
Application Workstation
On-line Optical Disks
Application Workstation


Service Representatives
Mailroom
Optical Storage Library (Not On-line)
Scanner
Image Workstation
Image Workstation
Figure 6-3
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USAA Success Conclusions
1. Provides quality service. 2. Attracts, trains,
retains and motivates employees. 3. Aggressively
and successfully uses information technology. 4.
Provides products and services to address the
changing needs of its customers. 5. Maintains
one of the lowest operating expense ratios in
the industry. 6. Achieves financial results that
warrant excellent to superior ratings. 7.
Makes business, organizational and management
changes on a timely basis. 8. Had an
outstanding CEO in General McDermott.
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Whirlpool Corporation

• Traditionally, a successful, well-managed
  company.
• A new CEO in 1987 who initiated a global vision
  in 1988.
• A global strategy that emphasized
• - Product Technology
• - Procurement
• Promoted a theme of Thinking global but acting
  local.
• Manufactures in 13 countries, has nearly 50
  product
• technology centers and markets products under
  13
• brands in 170 countries.
• Has the patience to allow the global strategy to
  evolve.
• Is the only company with a presence in four of
  the five
• global markets.
• Has realized impressive growth in revenue but
  not profits.
• Is becoming a new Whirlpool.

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Financial Performance
1991 - 6.5 billion in global sales 2001 - 10.3
billion in global sales.
1991 - 353 million in operating profit
2001 - 306 million in operating profit
.0297
.078
2002 was a better year.
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Whirlpool Corporation
Principal Products Automatic Dryers Automatic
Washers Dehumidifiers Dishwashers Freezers Microwa
ve Ovens Ranges Refrigerators Trash
Compactors Room Air Conditioners
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Who Buys Large Appliances?

• Contractors for new homes.
• Home owners for replacements.
• Appliance service businesses.
• Businesses and public sector entities.
• First time appliance buyers.

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Appliance Brands
Whirlpool Kitchen Aid Roper Whirlpool Kenmore
Manufactured for Sears
Maytag Admiral Hardwick Hoover Jenn-Air Magic
Chef Maytag Norge
GE GE RCA Hot Point
Electrolux Frigidaire Gibson Elna Eureka Kelvinat
or OKeefe and Merritt Tappan White-
Westinghouse
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Differentiation Strategy!?

• Clothes Management System
• Food Management System
• Home Management System
• Garage Management Systems

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Whirlpool Strategic Design

• Mission Statement
• Vision
• Value Creating Objectives
• Shared Values
• Worldwide Excellence System

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Whirlpool CorporationHow We Must Work, Think,
Plan and Manage to Reach Our Objectives
Whirlpool People Leadership Quality of Processes
and Products Fact-Based Management Strategic
Planning Measurement and Results Customer
Satisfaction
Figure 6-4
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Four Whirlpool Options
1. Stick to its large appliance knitting within
the North American market and fight for
increased market share with the hope that
economic factors would improve its market
conditions. 2. Diversify within the North
American market. 3. Pursue a global strategy as a
conservative player in multiple global
markets. 4. Pursue an aggressive global strategy
with the objective of leading the redefining
of the world- wide large appliance industry.
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Whirlpool Mission Statement
To shape and lead the major home appliance
industry globally, becoming one of the worlds
great companies while creating value for
shareholders, employees, customers, suppliers,
government leaders and communities.
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Whirlpool Vision
Whirlpool, in its chosen lines of business, will
grow with new opportunities and be the leader in
an ever-changing global market. We will be
driven by our commitment to continuous quality
improvement and to exceeding all of our
customers expectations. We will gain
competitive advantage through this, and by
building on our existing strengths and developing
new competencies. We will be market driven,
efficient and profitable. Our success will make
Whirlpool a company that worldwide customers,
employees and other stakeholders can depend on.
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Pyramid of Excellence
Stakeholder Value
Where
Vision
Way
Values
What
Total Quality
Value Creating Objectives
People Commitment
Growth Innovation
How
Customer Satisfaction
Worldwide Excellence System
Strategic Planning
Leadership
Whirlpool People
Fact-Based Management
Customer Satisfaction
Quality Process Products
Measurement Results
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Whirlpool Corporation
The market of tomorrow will be huge, filled with
tough savvy customers with a wide range of
preferences and choices. We must fulfill their
needs and meet their expectations in quality and
service. We must surprise them.
David R. Whitwam Whirlpool CEO
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Platform for Global Success
1. Product Technology. 2. Procurement. 3.
Information Systems
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GE Versus Whirlpool
Has tried for years to dislodge Whirlpool as No.
1 in the US. GE spent 100 million to develop a
new washer. Plastic washer basket versus
traditional porcelain. Lost a major battle to win
Sears washer business. Gained two percentage
points in market share in 2000. (2 is 400
million in a 20 billion market.) Offered
significant purchase rebates. Operating profits
were 12 (low for GE). President of GE Being in
this business is painful.
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Worldwide Major Appliance Industry
Japan Matshushita Electric
Hitachi Korea Samsung
United States Whirlpool General Electric
Maytag Sweden Electrolux
Figure 6-5
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Morita and Sony
Sony was born in 1946 when Morita, the oldest son
of a rice wine brewer, joined former Japanese
navy colleague Masaru Ibuka, a fellow engineer,
to start a business repairing radios on a
borrowed 500. A significant number of firsts
- Japans first transistors in 1954. -
Japans first transistor radio in 1955. -
First Japanese company to be listed on the NYSE.
- First Japanese company to build a U.S.
factory. Morita told engineers to make Walkmans
despite the lack of market research. We dont
believe in market research for a new product
unknown to the public. So we never do any.
Approach emphasis innovation in design,
manufacturing and marketing.
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Lee Kuan Yew and Singapore Inc.
Although no nation's history can ever be reduced
to the story of one man, Lee Kuan Yew had such a
paramount role in making modem Singapore that an
understanding of that country, its society and
its business environment cannot be complete
without an attempt at understanding Lee himself.
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Newspapers
Newspapers serve our democratic society by
vigilantly protecting the peoples right to know.
Newspapers are the leaders in providing news,
editorial comment, information and advertising.
Newspaper Association of America
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Newspapers will remain vital and sustain their
vigilance by

• Investing energy and resources to strengthen
  their value to readers and advertisers.
• Continuing to be the most comprehensive source of
  gathering, organizing and presenting news and
  information.
• Pioneering businesses that anticipate and meet
  the changing needs and desires of consumers and
  marketers.
• Attracting, retaining and advancing a talented,
  creative and diverse workforce.

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A Good Vision Statement

• Provides a clear picture of what the company
  wants to be in the future.
• Excites and motivates people and gains consensus
  and commitment.
• Focuses on operations.
• Is measurable at least in general terms.
• Establishes a standard of excellence.
• Changes the basis for competition.

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Business Vision
Increasingly, companies are using vision
statements to explain who they are, where they
are going and why customers and employees should
follow them there.
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A Good Vision Statement?
To continue to be the worlds best way to pay and
be paid for consumers and businesses.
Visa International
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Good Vision Statement?
Absolutely, positively overnight!
Federal Express
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Good Vision Statement?
To make the maximum computing power available to
a broad user audience through open technologies.

Sun Microsystems
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Sun Vision Statement
To be an industry leader, you need vision. But
thats just the beginning. You also need the
people, products, and relationships to take your
vision to market and turn it into a compelling
reality.
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Good Vision Statement?
To provide the best service and lowest fares to
the short haul, frequent-flying, point-to-point,
non-interlining traveler.
Southwest Airlines
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When you have a vision and someone comes to you
with some convoluted idea, you should be able to
hold it up to the vision and ask Does it fit?
Does it fly? If not, dont bother with it.
The ingredient that catapulted Southwest to the
top of the industry is simple, elegant and well
publicized.
Discipline, focus and execution.
Throughout its existence, Southwest has
consistently adhered to a clearly defined purpose
and a well thought out strategy for accomplishing
it.
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Good Vision Statement?
Do it, try it, fix it!
Wal-Mart Stores
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Wal-Mart Vision
I concentrated all along on building the finest
retailing company that we possibly could.
Period.
Creating a huge personal fortune was never a
goal of mine.
Sam Walton
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Wal-Mart Vision
Walton built incrementally, step by step from a
single store until a rural discount store model
popped out as a natural evolutionary step.
If you are not serving the customer or supporting
the folks that do then we dont need you.
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Wal-Mart Core Values

• We exist to provide value to our customersto
  make their lives better via lower prices and
  greater selection all else is secondary.
• Swim upstream, buck conventional wisdom.
• Be in partnership with employees.
• Work with passion, commitment and enthusiasm.
• Run lean.
• Pursue ever-higher goals.

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Built to Last Conclusions

• A visionary company does not by definition start
  with a
• great idea.

2. A charismatic leader is not required for a
visionary company.
3. There are no standard core values to be a
visionary company.
4. A visionary company is not built on frequent
change but a focus over time on its core
ideology.
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Built to Last Conclusions
5. Visionary companies may appear conservative to
outsiders but they are not afraid to make bold
commitments and/or establish ambitious goals.
6. Only those people who fit well with the core
ideology and the demanding standards of a
visionary company will find it a great place to
work.
7. Visionary companies make some of their best
moves by experimentation, trail and error,
opportunism and accidentally.
8. Great visionary companies seldom go outside to
hire a new CEO.
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Built to Last Conclusions
9. Visionary companies focus primarily on beating
themselves.
10. Visionary companies believe they can
accomplish major objectives simultaneously
without making major negative trade-offs.
11. Visionary companies attained their successful
status not so much because they made visionary
pronouncements (although they frequently did) but
by pursuing a never-ending process of emphasizing
the above factors.
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Soft Visionaries?
Visionary does not mean soft and undisciplined.
Because the visionary companies have such
clarity about who they are, what they are about
and what they are trying to achieve, they tend to
not have much room for people unwilling or
unsuited to their demanding standards.
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A Logical Vision Process

• Define the Business Environment.
• Build a Company Vision.
• Turn the Vision into a Plan.
• Drive Action with the Plan.

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Invest
Vision
Save Money
Asset
Applications
Networks
Expense
Strategic
Tools
Tactical
100
By instilling
You create
Which results in
Improved Performance
Leadership
Vision
Market Impact
A Great Company
Strategy
Excellent Reputation
Tactical Excellence
Sustained Success
Innovation
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Leadership Significance
Take a measure of the people at the top of a
business and you will get a clearer sense of that
companys past accomplishments and future
prospects than from its balance sheet,
profitability, cash flow, market share and market
capitalization.
People matter most and accounting cannot quantify
their value. The drama of a business lies in
the people who make things happen.
102
Successful Business Leader
Andris Istvan Grof
103
Andy Grove
Walked out of Communist Hungary when he was 20
years old in 1956 and arrived in the US in 1965
with no money and no English capability.
Earned a degree in Chemical Engineering from NYU
and a PhD from Cal, Berkeley in 1963.
An intellectual and a visionary who says he
doesnt know the next big thing that will happen
in his industry who has achieved phenomenal
success but is always afraid.
Worries about fighting complacency and emphasizes
measuring failure.
As a manager, fear is your ally because it gets
you out of your comfort zone.
104
Andy Grove
Dont eliminate the fear of what is going to
happen if you dont move.
A good manager will train people to deal with
fear by example, by discussion, by cognitive
processes.
It was very difficult to decide to get out of the
memory business because we had created the
business in the first place. This meant reducing
the company in terms of people by one third and
closing eight facilities (also 1/3).
These kind of decisions are easier if you can
take an outsiders perspective of the situation.
When in doubt, talk to customers who are unhappy
with what you are doing.
105
Andy Grove
Current concerns Intel has become a very big
business. It is a world wide business with a
phenomenal track record. It grew very rapidly
and transformed. A lot of hard work went into
reinventing the PC the right wayfinding new uses
and finding them any where in the world.
Maintaining the engine of reinvention, of new
customers and new uses and keeping that engine
going is a major concern.
106
Andy Grove

• Intels success is based on three foundations
• Product Design
• Technology and Manufacturing
• Marketing and Sales
• All three must be equally strong.

107
A Vision that Works

• It gains commitment and energizes employees.
• It creates meaning in employees lives.
• It helps to establish a standard of excellence.
• It bridges the past and the future.
• It assures future business success.

108
Vision
Which attitude would you support on this subject?
1. There is little hard evidence that companies
with vision statements perform better than
those without. 2. At the current rate of
change in the business environment,
companies need a clear, consistent sense of
where they are going.