What’s Happening?!

1
Whats Happening?!
Consumer Electronics Show Las Vegas 2,000
companies in a million square feet of space
An obvious reminder that there is a major merging
of the computer industry and the consumer
electronics industry.
Bill Gates gave the keynote speech.
Major product focus on mobility which means
wireless and miniaturization.
2
FYI
If you email me send it to my school address
which is automatically forwarded to me at home.
3
Due Today

• Introduction Letters.
• Requests for the company that you will base your
  analysis term paper in priority sequence.
• Please also return the business awareness
• questionnaires.

4
Given your understanding of the content of this
course
Lets begin.
5
Chapter 1 Introduction

• Business and Information Systems Management
  Challenges
• By Steven Parker

6
Objective of the Chapter
To introduce the major business issues that must
be addressed to successfully manage a business
and factors that would influence the possible
role of information systems as an enabler of
business success.
This is clearly a big picture chapter rather than
one that fits within a broader perspective.
7
Major Chapter Topics
1. The challenges of running a successful
business in the current global environment. 2.
Specific business success factors. 3. Three
necessary perspectives. 4. Simultaneous
revolutions in the current environment. 5. A
business driver model. 6. A possible systematic
approach to gain better results from the use of
information systems. 7. The three possible roles
of information systems.
8
Business Success Factors

• A credible list of success factors would
  undoubtedly vary if cited by a specific
  successful executive or highlighted by one of
  multiple highly publicized studies.
• The chapter cites eight such factors with an
  emphasis on business leadership, company culture
  and effective communication.

9
Three Necessary Perspectives

• Business Environment
• Specific industry
• Enterprise Environment
• The company itself
• Information Technology
• Used for a competitive advantage

10
Business Driver Model

• 1. Helps to understand the business
• environment
• 2. The four components affect how an organization
  
• addresses business processes
• Market
• Technology
• Regulation
• Employees and Work

11
Systematic Approach to Information Systems

• The class roadmap chart
• Emphasizes the important factors to manage the
  business and the relationship with and possible
  role of information systems.
• Highlights the relationship between managing the
  business and managing information systems
  relative to business priorities and needs.

12
Identifies three possible roles of Information
Systems

• Efficiency
• Effectiveness
• Competitive Advantage
• As a companys Information Systems evolve,
  
• it often uses IS in a more sophisticated and
• competitive manner.

13
Suggests A Quick Assessment of the Significance
of Information Systems in a Company

• Would increasing the involvement of IS increase
  value to customers?
• Is the IS manager one of the top managers?
• Is the role of information systems a top priority
  for multiple senior managers?
• How much of the revenue dollar is the company
  spending on IS?
• Is IS an integral part of the daily business
  operations?

14
Additional Points Made
1. Introduces multiple company examples where
key business strategies were successfully
supported by the effective implementation and use
of information systems. 2. Reminds us that some
industries have far better track records through
the use of information systems than others.
15
In Conclusion
This chapter is obviously the start of a ten week
journey.
Bon voyage!
16
Chapter 1

• Business
• and
• Information Systems
• Management

17
Three Necessary Perspectives
Business Success

• Business Environment
• Enterprise Environment
• I/T Environment

Figure 1-1
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A Fundamental Premise

• Innovative Uses
• of Information Systems
• Requires a Systematic Approach

19
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 Logical Premise

• Competing with
• Information Technology
• through People.

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IS Roles (Objective)
1. Efficiency--doing things better.
2. Effectiveness--broadening the scope of
individual tasks, jobs or processes.
3. Competitive Advantage--doing better or
new things for the customer.
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Key to Business Success
Competitiveness is the pivotal issue in the 21st
century.
Global competitiveness has frequently become the
pivotal issue in the 21st century. (an
offense/defense decision)
23
Competitiveness
How does a business compete?
What benefits does a business gain if it competes
successfully to the point of being a market
leader?
24
Market Leader Benefits?
Increased volumes.
Lower unit cost.
Higher profit margins.
Ability to invest in product development and
market exploitation.
Increased brand strength.
Satisfied customers.
Customers less likely to substitute.
Lower probability of new entrants.
Happy, motivated employees and other stakeholders.
25
Purpose of a Business
The purpose of a business is to create a customer.
For this reason a business has only two basic
functions
1. Marketing.
2. Innovation.
This demands that a business define its goal as
the satisfaction of customer needs.
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Purpose of a Business
The customer defines the business.
The customer is primarily interested in its own
wants, needs, values and reality.
Defining a business must start with understanding
the customers realities, situation, behavior,
expectations and values.
The business is defined by the want the customer
satisfies when a purchase is made.
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Who is the Customer?
Not a simple or intuitively obvious question.
There is never the customer but multiple
customers that are frequently different.
Each customer has possible different expectations
and values and may think that it is buying
something different or for a different reason.
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Where is the Customer?
An increasingly important question.
Greatly influenced by increasing mobility on a
global basis.
What does the Internet do to questions regarding
where is the customer?
29
A Successful Business
The right business model now and for the future.

• Is responsive, flexible, adaptable, innovative,
• resilient, talented and financially strong.
• Provides value to customers.

Is anything else necessary to achieve and sustain
business success?
30
Running a successful business is like doing a
jigsaw puzzle. The problem is that the pieces
and the picture are both changing. Cy
ril J. Yansouni Chairman and
CEO Read-Rite Corp.
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My Selection Criteria
Started with list of companies in the In Search
of Excellence book.
Frito-Lay, American Airlines, Boeing
Emphasized the role of senior management to focus
the role of information systems on key business
strategies from the very beginning. Also how IS
was used to make significant changes.
Quickly discovered that good companies could
point me to other good companies.
Wal-Mart, USAA, Federal Express, Schwab, L.L. Bean
32
Using IS to Compete

• American Airlines
• Boeing
• Federal Express
• Frito-Lay
• Frost Inc.
• IBM Canada
• Marion Laboratories
• McKesson Corp.

• L.L. Bean
• National Institutes of Health
• Progressive Corp.
• Charles Schwab
• Security Pacific Bank
• USAA
• University of South Carolina
• Wal-Mart Stores

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Business Success Factors

• 1. Business Leadership.
• 2. The Ability to Fit the Pieces into the
  Increasingly Bigger Business Picture.
• 3. Organizational Responsiveness and Resilience.
• 4. Realizing That Most Major Customer Problems
  Are Solved Through a Combined Organizational
  Effort.

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Business Success Factors
5. A Strong Company Culture. 6. Ability and
Willingness to Innovate, Change and Take
Risks. 7. Accomplishing All of These Factors
While Maintaining a Necessary Balance. 8.
Effective and Timely Communication Across
the Entire Organization.
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Successful Books
In Search of Excellence Lessons from America's
Best-Run Companies by Tom Peters and Robert
Waterman, 1982 (43 companies)
Built to Last by Jim Collins and Jerry Porras,
1994 (20 companies)
Good to Great, 2001 by Jim Collins, 2001
(11 companies)
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Built to Last
The objective in a six year study was to
systematically identify visionary companies, to
examine how they differed from comparison
companies to understand the underlying factors
that account for their extraordinary long term
position.
Visionary companies were identified based on
their having distinguished themselves as a very
special and elite breed of institutions.
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Built to Last Companies
Marriott Merck Motorola Nordstrom Phillip
Morris Procter Gamble Sony Wal-Mart Stores Walt
Disney
3M American Express Boeing Citicorp Ford General
Electric Hewlett-Packard IBM Johnson Johnson
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Good to Great Companies

• Abbott
• Circuit City
• Fannie Mae
• Gillette
• Kimberly-Clark
• Kroger

• Nucor
• Philip Morris
• Pitney Bowes
• Walgreens
• Wells Fargo

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Selection Criteria

• Premier institution in its industry.
• Widely admired by knowledgeable businesspeople.
• Made an indelible imprint on the world in which
  we
• live.
• Had multiple generations of chief executives.
• Been through multiple product (or service)
  cycles.
• Founded before 1950.

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Selection Criteria
Started with Fortune 500 ranking of 1,435 largest
publicly traded US companies in 1965, 1975, 1985
and 1995.
Did a sophisticated analysis of compounded annual
return looking for companies that showed a
pattern of above average returns preceded by
average or below average returns. This reduced
the list to 126 companies.
Analyzed the cumulative stock return relative to
the general market looking for good-to-great
stock return patterns. Reduced the list to 19
companies.
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Dow Jones Industrial List

• McDonalds
• Merck
• Microsoft
• 3M
• Philip Morris
• Procter Gamble
• SBC Communication
• United Technology
• Wal-Mart Stores
• Walt Disney

• Alcoa
• Honeywell
• American Express
• ATT
• Boeing
• Caterpillar
• Citigroup
• Coca-Cola
• DuPont
• Eastman Kodak

• Exxon Mobil
• General Electric
• General Motors
• Hewlett-Packard
• Home Depot
• Intel
• IBM
• International Paper
• JP Morgan
• Johnson Johnson

42
Business Challenges
1. Relative to all of this, what role should
information systems play?
2. How do you determine relevance regarding any
of these factors?
43
SIMULTANEOUS REVOLUTIONS
NEW COMPETITORS
NEW RULES OF COMPETITION
NEW POLITICAL AGENDAS
INDUSTRY STRUCTURE CHANGES
THE BUSINESS
NEW TECHNOLOGIES
NEW REGULATORY ENVIRONMENT
NEW EMPLOYEES AND NEW VALUES
EVER INCREASING CUSTOMER EXPECTATIONS
Figure 1-2
44
New Competitors

• Global defines the competitive landscape.
• Aircraft and communication technologies are
  shrinking the
• economic world.
• English has become the international language.
• There are very few countries that are not global
  players.
• Standardization of industrial and consumer
  products.
• Breakdown in industry boundaries is also
  resulting in new
• domestic competitors.
• Technology versus physical competition via the
  Internet.

45
New Rules of Competition

• Speed has become a major success factor
  including time to
• market, time to decisions and response time to
  customers.
• Distribution has become a key competitive
  strategy.
• Productivity defines competitive positioning.
• Assets can become a liability.
• Quality as a competitive factor is a given.
• All business functions must contribute value to
  customers.
• Need to focus on core processes and outsource
  the rest.
• Success is a combination of leadership and
  empowerment.
• When timely to do so, reinvent the business.

46
Industry Structure Changes

• The US has led the way, but the rest of the
  world is also
• deregulating industries and/or privatizing
  government
• owned businesses.
• Freedom from government imposed laws and/or
  controls
• frequently leads to industry structure change.
• IT has prompted industry change because of the
  direct
• access aspects of the Internet.
• Open competition over time results in industry
  change based
• on changing rules of competition.

47
New Regulatory Environment

• One could conclude that there is a definite
  trend towards
• deregulation of industries. In some cases this
  can be
• misleading.
• Highly visible industries tend to be directly or
  indirectly
• regulated in some form.
• As long as there are politicians there will be
  new laws and/or
• regulations that can directly impact specific
  industries.
• Business managers prefer to compete openly
  despite a
• perception of the benefits of having a
  protected market.

48
Increasing Customer Expectations
Is there such a thing as a customer that would be
happier with a more costly, lower quality product
or service?
The better you do in servicing your customer, the
more they will want (and expect)!
Time constraints and pressures on customers also
prompts an increase in their expectations since
they often do not have the time or inclination to
find alternative sources.
On the other hand, the global economy offers more
options and alternative sources.
49
New Employees and Values
Salary and benefit expectations are greatly
influenced by the financial status of people
while they were growing to adulthood.
Different attitudes towards authority and
societal issues.
Surveys say that salary is not the highest
priority for many employees.
Meanwhile, an increasing number of people are
pursuing the startup route to get rich.
50
New Technologies

• IT and transportation technologies have changed
  the world
• of competition and can greatly influence
  success or failure
• of a company.
• The pace of technology change adds to the
  challenge.
• New technologies often complement each other.
• The impact of the Internet as a global network
  is huge.
• Integrating IT into a rapidly changing business
  can be a
• major challenge.

51
New Political Agenda

• Importance of government role in positioning
  industries to
• compete on a global basis.
• Tax policies are an important consideration.
• Regional partnerships are replacing individual
  country roles.
• Protectionism is an on-going threat.
• Monetary and fiscal policies add to challenges
  of competing
• in global markets.
• Political instability has not disappeared from
  the global
• economic world.

52
SIMULTANEOUS REVOLUTIONS
NEW COMPETITORS
NEW RULES OF COMPETITION
NEW POLITICAL AGENDAS
INDUSTRY STRUCTURE CHANGES
THE BUSINESS
NEW TECHNOLOGIES
NEW REGULATORY ENVIRONMENT
NEW EMPLOYEES AND NEW VALUES
EVER INCREASING CUSTOMER EXPECTATIONS
Figure 1-2
53
The Right Way to Go Global
Being an international company - selling
globally, having global brands or operations in
different countries -- isn't enough. Everyone
is going global, but do they really understand
what this means.
54
Worlds Most Valuable Brands
Who are the top ten companies with the worlds
most valuable brands?
9 of top 10 are US companies. The list is not
limited to consumer product companies.
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Worlds Most Valuable Brands

• Coca Cola 68.9 Billion
• Microsoft 65.1
• IBM 52.8
• GE 42.4
• Kokia 35.0
• Intel 34.7
• Disney 32.6
• Ford 30.1
• McDonalds 25.3
• ATT 22.8

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Worlds Most Valuable Brands
11. Marboro 12. Mercedes 13. Citibank 14.
Toyota 15. HP 16. Cisco Systems 17. American
Express 18. Gillette 19. Merrill Lynch 20. Sony
24. Compaq 25. Oracle 32. Dell 43. SAP 49. Apple
53. Sun Microsystems 58. AOL 76. Amazon.com 100.
Beneton
www.interbrand.com
57
Globalization
Is probably one of the most overused , even
misused, terms in business parlance.
Traditionally, global scope was likely to be a
multinational presence.
A truly global company is able to capitalize on
business opportunities wherever and whenever they
are found.
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A Global Company
Its influence is felt in geographic locations
where it has neither physical presence or assets.
The principle constraint on the global success of
an organization is its management aimthe
ability of management to point the company in the
right direction.
59
Globalization
Globalization deals not with the mechanics of
making links with diverse locations but with
dedicating organizational resources to
continuously monitoring and taking advantage of
opportunities that emerge throughout the world.
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Globalization Checklist
1. Make yourself at home in all three of the
worlds most important markets North
America, Europe and Asia and keep your eye
on Latin America.
2. Develop new products for the entire world.
3. Replace profit centers based on countries and
regions with ones based on product lines.
4. Make global decisions on strategic questions
involving products, capital and research but
let local units decide tactical questions
like packaging, marketing and advertising.
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Globalization Checklist
5. Overcome parochial attitudes and train people
to think and act internationally.
6. Open senior executive ranks to foreign
employees.
7. Do whatever is best even if people at home
lose jobs or responsibilities.
8. In markets that you cannot effectively
penetrate on your own, find allies.
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Daimler-Benz Globalization

• Jürgen Schrempp, Chief Executive of Daimler-Benz
  
• For Daimler-Benz globalization is not an
  optional
• strategy. It is the only one.
• By the year 2010 we want to be number one or two
  in
• each of our business areas.
• We are the world leader in commercial vehicles,
  number
• one in rail systems through Adtranz and number
  two in
• aircraft through Airbus.
• We want to double our revenue and be in the top
  quartile
• of global companies in performance.
  

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Globalization Plan
1. Be in the growth markets around the world with
the right products and the right services in
the right places. 2. Be a leader in
innovation. Only companies which anticipate
people's needs, translate great ideas into
products and services, and get them into the
market fast, will succeed. 3. Be exciting
and rewarding for our people.
Globalization creates jobs both in other
countries and in the home market. For every
three jobs created abroad, one is created in
Germany.
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Globalization Plan
4. Have the right corporate culture. To be a
successful global company requires
exceptional executives - people who have
industrial skills, but can also adapt to local
communities and respond to their needs.
5. Access to global capital. That
means listing on the leading stock markets.
It also means presenting your financial
accounts to the standards of the transparency
demanded by investors. But most of
all, globalization is about creating value for
people. Producing products they want, creating
interesting jobs, and delivering excellent
returns for shareholders.
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Jack Welch Business Principles

• Realityseeing the world the way it is, not the
  way that you hope it will be or wish it to be.
• GE must be No. 1 or No. 2 in its global markets.
• Accepting the fact that E-Business is here.
• Means going on the offensive.

66
Welch Business Principles

• 2. An organizations ability to learn, to
  transfer its
• learning across its components and to act on
  it quickly
• as its ultimate, sustainable competitive
  advantage.
• Drove GE to create a boundary-less company.
• Selfishly sharing good ideas while endlessly
  searching for
• better ideas became a natural act.

67
Welch Business Principles
3. An organization that is comfortable with
change and even relishes it, has a distinct
advantage in a world where the pace of change
is always accelerating.

• Had the luxury of learning this when change was
  relatively slow and opportunities hung open for
  about a decade.
• Experience in partnering with European companies
  when opportunities lasted two or three years.
• Experience in partnering with Asian companies
  when opportunities were gone in a year.
• Today, in the midst of the Internet revolution,
  the opportunities presented by change open and
  close on a daily basis.

68
Welch Business Principles
4. Measuring Progressmeasuring new things and
doing so on a daily basis. The measure focus is
on Buy Auctions on line, percentage of total
buy on line and the dollars saved. Make How fast
information gets from its origin to its users and
how much unproductive gate gathering, expediting,
tracking orders and the like can be
eliminated. Sell Number of visitors, sales on
line, percentage of sales on line, new customers,
share, span and the like. Strategic Exposure to
emerging companies.
69
Barriers to a Global Economy

• Africa is a lost continent.
• Latin America is sliding into terminal poverty.
• Their people can only look forward to migrating
  from place to place looking for hope.
• They will redefine hope in fundamentally
  different ways--a world war of terrorism that can
  rip the fabric of complex systems.

Jacques Attali Former head of European Bank for
Reconstruction and Development
70
The Best Structural Approach?

• Government controlled and managed.
• A combination of government and business.
• Multinational companies operating according to
  government guidelines.
• A totally open system with governments dealing
  only with activities within their own country.

71
Business Drivers
Market
Technology
Employees/ Work
Regulation
Organization
Business Processes
Solutions to Business Requirements
Figure 1-3
72
Business Environment
It has become more difficult to describe a
business environment that applies to everyone.
Historically an environment that was conducive to
success within a specific industry was good for
every company in the industry.
Today, the companies within a specific industry
can have a wide range of different performances
and results.
73
For Instance
Contrast the success of Wal-Mart with the
following three retailers Montgomery
Ward Kmart Sears, Roebuck
74
Some Appropriate Questions

• How profound are the changes in the business
• environment?
• How deeply rooted are any of the problems?
• Have solutions been successfully implemented to
• address the problems?
• Can the success be emulated?
• Where does a company begin to solve its problems?

75
Business Challenges
1. Relative to all of this, what role should
information systems play?
2. How do you determine relevance regarding any
of these factors?
76
IT Relevance
Industries with a high information content.
Industries with less information content.
77
A Logical Goal?

• 1. Competing with Information Technology.

2. Using Information Systems to Compete.

• 3. Creating the Necessary Environment to Use
• Information Systems to Compete.

78
The Information Technology Environment
Administrative Framework Regulated Monopoly Fre
e Market Regulated Free Market
Primary Target
Justification/ Purpose
ERA I Data Processing ERA II End User
Computing ERA III Strategic Systems
Productivity/ Efficiency
Organizational
Individual
Effectiveness
Business Processes
Competitive Advantage
Source Cash, McFarlan, McKenney and Appleton,
Corporate Information Systems Management,
Richard D. Irwin,1992, 3/E, p. 11, adapted.
Figure 1-5
79
How Fragile is Business Success?
How much of the answer to this question is
related to business leadership and strategies?
How much of the answer to this question is
related to information technology leadership
and strategies?
80
IT Significance
If your business lives by information technology
can it also die by information technology?
How much of an IT dependency does a company have?
How much change must they deal with in defining
their business to be successful in the future?
81
Competitive Fitness Evaluation Criteria
Mission and Vision
Corporate Culture
Customer Orientation
Planning and Intelligence
Organization and Systems
Human Resources
Technical Resources
Marketing Operations
Innovation
International Strategy
Market Strategy
Performance
Source Jean-Claude Larreche, INSEAD
82
A Quick IS Assessment

• 1. How is Business?
• 2. Is the Information Systems Manager a Member of
  the Top Management Team?
• 3. What Percentage of the Operating Budget of the
  Business is for Information Systems?

83
Examples of Successful Company Use of I/S to
Compete

• Boeing Airplane Company
• Wal-Mart Stores
• Bissett Nursery Corp.
• Federal Express
• Charles Schwab
• USAA
• L.L. Bean
• Progressive Corp.

Your quota is 5 companies!
84
Best ISTC Industries

• Transportation Industry
• American Airlines
• American President Co.
• British Airways
• CSX
• Delta Airlines
• FedEx
• Singapore Airlines
• Union Pacific
• United Airlines
• UPS

• Retail Industry
• L. L. Bean
• Dillards Dept. Store
• The Gap
• Home Depot
• Kmart
• Mens Wearhouse
• Mervyns
• J C Penney
• Toys R Us
• Wal-Mart Stores

85
Worst ISTC Industries

• Construction Industry

Petroleum Industry
Federal Government
86
Can the IS be right if
1. The business climate is wrong.
2. The business strategy is wrong.
3. The business leadership is wrong.
87
Business Strategy and IS

• Concepts.
• Relative To (Bigger Picture).
• Company Examples.

88
Conclusions
To logically and effectively position information
systems within an organization one must begin by
understanding the environment and the company
itself. Then and only then can you understand
the significance of the role of information
systems.