Week 4 Monday, September 19

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Week 4Monday, September 19

• IT Leadership
• Strategic IT
• e-Business Model
• IT Planning

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IT Leadership

• Role of CIO
• Changes with advances in IT that open new
  opportunities
• Determined by the business' vision, mission and
  strategic plan to capitalize on opportunities
• Shaped by the business plan to capture
  opportunities
• Specified by the adoption and the business'
  expectations of IT

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American Airlines and SABRELeveraging IT for a
Competitive Advantage
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American Airlines and SABRESummary

• Accurate passenger inventories allowed American
  to manage under/overbookings to jointly optimize
  passenger service and capacity utilization levels
• Reduced labor content in the reservations process
  while increasing the productivity of the
  remaining reservation personnel (efficiency)
• Increased their presence in current markets
• Increased their presence in markets not served

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American Airlines IT and Electronic Commerce

• Level 0 - No automation between the organization
  and its external entities (internal operations
  control)
• Level 1 - Telecommunication link between the
  organization and its customers (data sharing)
• Level 2 - Telecommunication links between the
  organization, and its customers and suppliers
  (process and information integration)
• Level 3 - Strategic alliances formed with
  competitors to offer products and services to
  customers (electronic market facilitation)

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American Airlines and SABRE
Level 0
Level 1 Retail Automation
Travel agents and corporate offices
Level 2 Co-hosting
Travel agents and corporate offices
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American Airlines and SABRE
Level 3 Strategic Alliances
Co-host
Travel agents, corporate offices, public
Codeshare Alliances
Codeshare Alliances
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American Airlines Codeshare Alliances
AA Codeshare Alliances
A codeshare is an agreement where
American Airlines purchases seats on selected
routes and markets them as an American Airline
flight. Codeshare alliances allow American to
offer our customers access to hundreds of
international and domestic U.S. destinations,
while ensuring consistent, coordinated, and high
quality passenger service.
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Horizontal Integration
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Star Alliance
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Star Alliance
"One-stop" shopping
Star Alliance members
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Star Alliance
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United and Customer Loyalty
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Star Alliance
Loyalty Benefits
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Star Alliance
Loyalty Benefits
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B2B and Supply Chain

• Coordinating suppliers
• From EDI (electronic data interchange) to the
  Internet
• Establishing close and tight relationships
• Loose integration ad hoc and occasional
• Close integration formal exchange of
  information between two businesses
• Tight integration sharing a business processes
  (e.g., UPS)
• Becoming a customer-centric value chain (virtual
  enterprise)
• Risk sharing
• Supply chain (suppliers) vs. demand chain
  (distributors and retailers)

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Boeing Aircraft and SuppliersAssembling an
Aircraft
Boeing 787
Risk sharing partners
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Boeing and Primary Vendors
Company/Business Unit Main Location 787 Work Statement
Boeing Commercial Airplanes (announced Nov. and Dec. 2003) Washington Airplane development, integration, final assembly, program leadership
Alenia/Vought Aircraft Industries (announced Nov. 2003) Italy, Texas Horizontal stabilizer, center fuselage, aft fuselage
Boeing Fabrication (announced Nov. 2003) Washington, Canada, Australia Vertical tail assembly, movable trailing edges, wing-to-body fairing, interiors
Spirit Aerosystems Inc. (announced as Boeing - Wichita Nov. 2003 Apr. 2004) Kansas, Oklahoma Fixed and movable leading edges, flight deck, part of forward fuselage, engine pylons
Fuji Heavy Industries (announced Nov. 2003) Japan Center wing box, integration of the center wing box with the main landing gear wheel well
Kawasaki Heavy Industries (announced Nov. 2003) Japan Main landing gear wheel well, main wing fixed trailing edge, part of forward fuselage
Mitsubishi Heavy Industries (announced Nov. 2003) Japan Wing box
Hamilton Sundstrand (announced Feb. 2004, March 2004, July 2004, Sep. 2004) Connecticut Auxiliary power unit, environmental control system, remote power distribution units, electrical power generating and start system, primary power distribution, nitrogen generation, ram air turbine emergency power system, electric motor hydraulic pump subsystem
Rockwell Collins (announced Feb. 2004) Iowa Displays, communications/ surveillance systems
Honeywell (announced Feb. 2004, July 2004) Arizona Navigation, maintenance/crew information systems, flight control electronics exterior lighting
Smiths (announced Feb. 2004, Jun. 2004) United Kingdom Common core system, landing gear actuation and control system, high lift actuation system
Goodrich ( announced March 2004 April 2004, June 2004, Nov. 2004, Dec. 2004) North Carolina Fuel quantity indicating system, nacelles, proximity sensing system, electric brakes, exterior lighting, cargo handling system
Messier-Dowty (announced March 2004) France Landing gear structure
Dassault Systèmes (announced Feb. 2004) France Global collaboration tools/software
Boeing Interiors Responsibility Center (announced March 2004) Washington Interior
FR-HiTemp (announced March 2004) United Kingdom Pumps and valves
Rolls-Royce (announced April 2004) United Kingdom Engines
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General Electric (announced April 2004) Ohio Engines
Boeing Propulsion Systems Division (announced April 2004) Washington Propulsion systems engineering and procurement services
Moog Inc. (announced May 2004) New York Flight control actuators
Kidde Technologies (announced May 2004) North Carolina Fire protection system
Toray Industries (announced May 2004) Washington Prepreg composites
Kaiser Electroprecision (announced June 2004) California Pilot control system
Thales (announced July 2004, Aug. 2004) France Electrical power conversion, integrated standby flight display
Labinal (announced July 2004) France Wiring
Parker Hannifin (announced Sep. 2004) Ohio Hydraulic subsystem
Messier-Bugatti (announced Nov. 2004) France Electric brakes
Latecoere (announced Nov. 2004) France Passenger doors
Monogram Systems (announced Nov. 2004) California Water and waste system
Air Cruisers (announced Nov. 2004) New Jersey Escape slides
Delmia Corp. (announced Nov. 2004) Michigan Software
Intercim (announced Nov. 2004) Minnesota Software
Panasonic (announced Dec. 2004) Japan Cabin services system
Bridgestone (announced Dec. 2004) Japan Tires
Ultra Electronics Holdings (announced Dec. 2004) United Kingdom Wing ice protection system
GKN Aerospace (announced Dec. 2004) United Kingdom Composite mat for the wing ice protection system
Korry Electronics (announced Jan. 2005) Washington Flight-deck control panels
Ipeco (announced April 2005 United Kingdom Flight-deck seats
Diehl Luftfahrt Elektronik (announced April 2005) Germany Main cabin lighting
Jamco (announced Apr. 2005, May 2005) Japan Lavatories, flight deck interiors, flight deck door and bulkhead assembly
Northwest Composites Inc. (announced April 2005) Washington Sidewalls, window reveals, cargo linings, door linings and door surrounds
Securaplane (announced April 2005) Arizona Wireless emergency lighting system
Donaldson Company, Inc. (announced May 2005) Minnesota Air purification system
Astronautics Corp. of America (announced May 2005) Wisconsin Electronic Flight Bag (EFB)
CTT Systems (announced August 2005) Sweden Zonal Drying system
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Vertical Integration
Consumer
Retailer
(Distributor)
Supplier (manufacturer)
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B2C and Vertical Integration United.com
Air Transportation ? Car Rental ? Hotel
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B2C and Self-Service Travelocity.com
Customer specifies origin, destination and
dates Travelocity finds and presents airfare
alternatives
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B2B Vision Service Plan
VSP, doctors and patients
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Strategic IT Planning

• Alignment of the IT strategy to the business
  strategy
• Continuous planning vs. periodic planning
• IT portfolio vs. projects (6 months maximum)
• Robust IT infrastructure
• Enterprise planning
• Continuous improvement and reengineering
• Top-down vs. bottom-up, centralized vs.
  decentralized

Rapid advances in IT
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Ad Hoc Planning
Volume increases by its cube (v3), area by its
square (a2)
Duck Tongues A Tale of Redesigning the Duck
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Traditional Bricks and Mortar Business Model
Corporate Headquarter
Suppliers
Retail Store
Distribution Center
Store
Manufacturer
Consumer
Retail Store
Retail Store
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E-BusinessAn IT-Enabled Business Model

• Business model represents a
• Clearly stated plan for adding economic value by
  applying know-how to a set of resources in order
  to create a marketable product or service
  (Miles, Snow and Miles, 2000)
• E-Business, an IT-enabled business model
• Electronic network-based (Internet)
• Information primary resource

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Transitioning to e-BusinessMIT90 Framework
Structure
Vision
Management Processes
Strategy
Technology
Individuals Roles
Changes to one component require compensatory (or
retaliatory) changes to the others
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Traditional Business ModelOrganization Structure
Hierarchical Communication Flows
Organization
Silos
Functional Area
Functional Area
Functional Area
Each functional areas performance tends to be
optimized within itself
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Paradigm Shift
Defines the way problems and solutions are viewed
and developed
Traditional Business Models
e-Business Models
Information Management
Physical Resource Management
Paradigm shift

• Efficiency
• Logistics
• Physical presence

• Exploitation and leveraging of information and
  knowledge (factual, procedural, tacit)
• Virtual organizations (partnerships and
  alliances)
• Internet-enabling technologies

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e-Business ModelOrganization Structure
Organizational boundaries less discernible
Organization
Direction and vision
Functional Area
Functional Area
Functional Area
Shared knowledge
The entire organizations performance is optimized
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e-Business Transition Model
Structure
Technology
Successful E-Business Model
Management Processes
Strategy
Individuals and Roles
Strategy incorporates a vision of technology
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Strategy and Organization Structure

• Responding to the environment
• Opportunities
• Threats

Create a responsive organization structure
"If you have to react, it's too late"
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Planning Techniques

• Stages of Growth Nolan's Stages Theory
• Rockart's Critical Success Factors (CSF)
• Porter's Competitive Forces Model
• Porter's Value Chain Analysis
• e-Business value matrix
• Linkage analysis planning
• Scenario planning

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Nolan's Stage Theory

• All organizations go through four stages for IT
  adoption
• Introduction
• Contagion
• Control
• Integration

IT is recognized as a resource
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Nolan's Stages Theory
Investment in IT
IT Resource
Integration
Control
Contagion
Introduction
Time
Stage 1
Stage 2
Stage 3
Stage 4
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Critical Success Factors (CSF)

• Critical success factors thus are, for any
  business, the limited number of areas in which
  results, if they are satisfactory, will ensure
  successful competitive performance for the
  organization. They are the few key areas where
  'things must go right' for the business to
  flourish. If results in these areas are not
  adequate, the organization's efforts for the
  period will be less than desired. ... As a
  result, the critical success factors are areas of
  activity that should receive constant and careful
  attention from management. Rockart, 1979

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Prime Sources of CSFs

• Industry
• Determined by the characteristics of the industry
• Competitive strategy and industry position
• Actions of each organization within the scope of
  this industry
• Environmental factors
• Environmental events that affect the industry and
  organization (e.g., the economy)

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Prime Sources of CSFs

• Temporal factors
• Internal considerations
• Activities significant for the success of an
  organization for a particular period of time
  because they are below the threshold of
  acceptability at that time
• Managerial position
• Functions and responsibilities of each
  manager Bullen and Rockart, 1981

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Classification of CSFs Three Dimensions

• Internal versus External
• Internal Deal with issues and situations within
  the manager's control
• External Pertain to situations generally less
  under the manager's control
• Monitoring versus Building
• Monitoring Focuses on tracking and guiding the
  organization's performance (i.e., control)
• Building Aimed at adapting the organization to
  a perceived new environment (i.e., planning)
• Sources of CSFs

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Five Sources of CSFs

• Industry
• Strategy
• Environment
• Temporal
• Position (of manager)

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Major Dimensions of CSFs

• Sources
• Industry
• Strategy
• Environment
• Temporal
• Position

Interest rates
New skill acquisition
Building (Innovation)
Monitoring (Control)
External
Internal
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Benefits of CSF Approach

• Helps managers determine on which factors they
  should focus their attention
• Ensures those factors will receive careful and
  continuous management scrutiny
• Forces managers to develop good measure for those
  factors and to seek reports on each of the
  measures
• All a clear definition of the amount of
  information that must be collected by the
  organization and limits the costly collection of
  more data than necessary
• Moves the organization away from the trap of
  building its reporting and information system
  primarily around data that are easy to collect.

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Benefits of CSF Approach (Cont.)

• Acknowledges that some factors are temporal and
  that CSFs are manager specific
• This suggests that the information system should
  be in constant flux with new reports being
  developed as needed to accommodate changes in the
  organizations strategy, environment, or
  organization structure Rockart, 1979

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Hierarchical Nature of CSFs
Industry CSFs
Corporate CSFs
Sub-organization CSFs
Individual CSFs
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Porters Five Forces ModelForces that Shape
Strategy
?
How will the business react to threats (and
opportunities)?
Potential Entrants
Threat of new entrants
Industry Competitors
Bargaining power of buyers
Bargaining power of suppliers
Customers and Buyers
Suppliers
?
?
?
Rivalry among existing firms
Threat of substitute products or services
?
Substitutes
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Porters Five Forces Model
Potential Entrants
?
Threat of new entrants
Industry Competitors
The strategy and actions an organization adopts
depend upon its perceptions of itself and these
threats.
Bargaining power of buyers
Bargaining power of suppliers
Customers and Buyers
Suppliers

• Porters strategies
• Product differentiation (non-duplicable product
  or service)
• Low-cost producer
• Market niche (market segment or geographical
  market)

?
?
?
Rivalry among existing firms
Threat of substitute products or services
?
Substitutes
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Value Chain Analysis

• Primary activities
• Inbound logistics
• Operations converting inputs to outputs
• Outbound logistics
• Marketing and sales
• Service
• Supporting activities
• Organization infrastructure
• HR management
• Technology development
• Procurement

Getting the product or service to the customer
Enabling the value chain
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Value Chain Analysis
Firm infrastructure
Human resource management
Support Activities
Margin
Technology development
Procurement
Customers
Inbound logistics
Outbound logistics
Marketing and sales
Operations
Service
Margin
Primary Activities
How can value be added at every activity?
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e-Business Value Matrix

• Project categories
• New fundamentals
• Operational excellence
• Rational experimentation
• Breakthrough strategy
• Value of the project (low, high)
• Criticality to business
• Newness of idea

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e-Business Value Matrix
Operational excellence, high criticality to
business, high newness of idea
New fundamentals
Operational excellence
Rational experimentation
High
Breakthrough strategy
Newness of Idea
Low
Low
High
Criticality to business
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Linkage Analysis Planning

• Steps
• Define power relationships among various players
  and stakeholders
• Map out the extended enterprise to include
  suppliers, buyers and strategic partners
• Plan electronic channels to deliver the
  information component of products and services

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Linkage Analysis Planning
Top management
Middle management
Operations management
Electronic Channels
Traditional competitors
New competitors
Retailers
Suppliers
Distributors
Government
Stockholders
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Scenario Planning

• Steps
• Define a decision problem and timeframe to bound
  the analysis
• Identify the major known trends that will affect
  the decision problem
• Identify just a few driving uncertainties
• Construct the scenarios

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Scenario Planning
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