Balancing the Portfolio

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(No Transcript)
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Balancing the Portfolio SIM - 2002

• 25 years ago first SIM speech
• What has stayed the same?
• What has changed?
• What does the future hold?

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What has stayed the same?

• Rapid technology change (Vendor fragility)
• Organization resistance to change 54th AMP
  yearbook - 1968
• Stages Theory (new technologies)
• Technical skill obsolescence/ individual
  renewal

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What has stayed the same? (continued)

• Applications development portfolio -
  Implementation risk - Contingency management -
  Alignment corporate strategy
• Efficiency capacity issues
• Strategic grid contingency management
• The need for a CIO

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STRATEGIC IMPACTAPPLICATIONS DEVELOPMENT
PORTFOLIO
High
Strategic
Factory

• Strategic
• Dependence
• Existing
• Operating
• Systems
• A - Major Electronic Components Firms
• B - Major Brokerage
• C - Large Agricultural Firm
• E - Major Airline
• F - Major Consulting Organization
• G - Insurance Broker

Support
Turnaround
Low
High
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What has changed?

• Open standardsGlobal interconnectivity Case of
  Li Fung
• The Extended Enterprise BPO case of Nortel
  Acct, HR, IT The case of HEB/PG Extranet
  Fleet Cisco
• Application discontinuity Intranet Clicks
  and bricks

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What has changed?Global Interconnectivity -LI
FUNG

• Almost 100 years old
• Publicly traded Hong Kong family company
• Year 2002 - 5 billion sales USAOver 5,100
  employees
• Sourcing company- 69 sales USA- 27 sales
  Europe- Major retailers customers

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What has changed?Global Interconnectivity LI
FUNG

• Global supply network (1,000s) (Asia, Africa,
  Caribbean)
• 63 offices - 37 countries
• Soft goods 77
• 1997 Browser-enabled Intranet
  Development outsourcedall offices
• Extranet 10 major customers
  Development outsourced

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What has changed?

• Open standardsGlobal interconnectivity Case of
  Li Fung
• The Extended Enterprise BPO case of Nortel
  Acct, HR, IT The case of HEB/PG Extranet
  Fleet Cisco
• Application discontinuity Intranet Clicks
  and bricks

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E-BUSINESS SESSION - COMPANY ROLE REDEFINITION

• 1996 Scanner HEB space Supplier
  space
• 
  1989 FAX Orders
• Customer HEB stores HEB
  depots Suppliers
• HEB.com 2000 1990 Scanner
  
• Decision rights shift 1990 11.4 Inv.
  turns/year
• Asset responsibility shifts 1994 38.6 Inv.
  turns/year
• Costs squeezed out of value 1997 Negative
  inventory
  chain
• Delivery process changes 2000 Role of
  store
• IT permeates every part of chain

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What has changed?

• Open standardsGlobal interconnectivity Case of
  Li Fung
• The Extended Enterprise BPO case of Nortel
  Acct, HR, IT The case of HEB/PG Extranet
  Fleet Cisco
• Application discontinuity Intranet Clicks
  and bricks

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What has changed? The Extended Enterprise -
CISCO

• Company
• - 1993 Sales - 500 million
• - 2001 Sales - 20 billion
• E-Commerce
• B to B sales July 1, 1996 0
• B to B sales FY2001 18 billion
  (92)
• Supplier Direct to customer 65
• Customer service 82

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What has changed? The Extended Enterprise -
CISCO

• IT Applications - (continued)
• Product upgrades 92
• 18 million internal web pages i.e., product,
  travel, H.R., manuals, etc. - Intranet
• Management issues
• Built on ERP architecture
• Complete standard (PCs, databases, HTML)
• - 60 days acquisition
• SVP customer advocacy
• CIO - 25 customers (in field) - outward facing
• 1.3 billion payback

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What has changed? (continued)

• Literate users/(not designers)
• ImplementationPortfolio alignment in a dynamic
  competitive world - Chunking - Cultural
  overload - Common threads - Alignment,
  long-term - short-term needs - Balance
  vis-à-vis, industry benchmark,
  inside,outside, supply-chain, flexibility -
  What if planning
• Connecting the Dots, Cathleen Benko
  F. Warren
  McFarlan, HBS Press, 2003

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What has changed? (continued)

• First mover/fast follower - Schwab - Merrill
  Lynch
• Non-adapters get to dieStrategic necessity
• Infrastructure really matters Rise and fall
  ofThe Innovators Dilemma
• Outsourcing Its here complex - a web
  of relationshipsIndependence
  has a price
• Massively higher uptime requirements
  (redundancy, security)

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What has changed?First mover, fast follower -
Schwab-Merrill Lynch

• December 28, 1998SchwabMarket Cap 25.5
  billionMerrill market cap 25.4
  billion
• September 4, 2002- Schwab market cap 12.9
  billion- Merrill Lynch market cap 30.4 billion

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What has changed?First mover, fast follower -
Schwab-Merrill Lynch

• Two remarkable organizations and leaders
• Schwab beautifully positioned for challengea
  natural first mover
• Merrill - An attack on their culture -Hugely
  successful company
• Turn around - great leadership

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What has changed?First mover, fast follower
-KEY THEMES

• We are in a marathon not a sprintTechnical
  excellence must be there, BUT
• TIMING market entry depends
• Brand and financial strength really matter
• History and market position dictate first
  mover, fast follower positioning

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What has changed? (continued)

• First mover/fast follower - Schwab - Merrill
  Lynch
• Non-adapters get to dieStrategic necessity
• Infrastructure really matters Rise and fall
  ofThe Innovators Dilemma
• Outsourcing Its here complex - a web
  of relationships - Independence
  has a price
• Massively higher uptime requirements
  (redundancy, security)

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SUMMARY

• After 47 years, the best days are still ahead
• History of other transforming technologies is key
• Al Chandlers, A Nation Transformed by
  Information How Information Has
  Shaped the United States
  from Colonial Times to Present,
  
  (Oxford Univesity Press, 2000)

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SUMMARY (continued)

• The enablers arent necessarily profitable
  companies (or even survivors)
• Not sure about digital divide
• Future much more frictionless interconnected
  world people still matter
• The CIO still pivotal