What’s Happening?!

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Whats 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.
San Jose mayor had a mild stroke while delivering
his annual state of the city address.
Superbowl Sunday will bring the latest in
colossal TV ads.
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Revised Course Syllabus

• 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
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Chapter 6 Summary
Business Vision
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Chapter 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

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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

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What 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

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Implementation (Action)
The Vision to Action Process
Agreement Commitment
Tactics and Business Plan
Strategy
Feedback
Vision
Sensing Opportunity
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Vision Uncertainty

• The dynamics of the market
• Rapidly changing technologies
• The logic and need to address changing employee
  values and traditional methods
• The shift from old regulatory practices to new
  practices in many industries

9
Customer Service

• Frequently Drives the Vision!
• For USAA, General McDermotts four step process
• Automation
• Employee attrition
• Improved job training
• Decentralized decision making through empowering
  employees

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Role and Contribution of IS

• A horizontal integration of applications
• An executive partnership
• Technology experimentation and assimilation
• Leveraging their information systems
• Strategic architecture

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Whirlpools Global VisionTaking a companys best
capabilities and leveraging them in its worldwide
operations
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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Conclusions

• Successful companies are the result of good
  leadership.
• Talented leadership is demonstrated in the
  following forms
• Determining the direction of the business.
• Operational efficiency and effectiveness.
• Implementation and maintenance of a well directed
  information system.

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Possible Exam Questions

• What factors influence the creation of a vision?
• What impact does a vision have on information
  systems?

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Chapter 7 Introduction

• Implementing a Vision Strategy, Tactics, and
  Business Plan

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Chapter Objective

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

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Chapter 7 In Just One Slide!
The Four Components to Implement a Vision

• Vision What the company wants to look like in
  the future
• Strategy Ideas on how to accomplish the vision,
  by doing an internal and external analysis of the
  company.
• Tactics The specific, time-oriented method of
  implementing the decided strategies.
• Business Plan The plan for allocating company
  resources. (a.k.a Operating Plan or Budget)

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The Three Components of a New Strategy
Vision
External Assessment
Internal Assessment
A New Strategy
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Elements of a Business Strategy

• Competitive framework What market are you in?
  How big is it? Who are your competitors, and
  what are their strategies?
• Market target What type of customer are you
  selling to? What are their needs, attitudes, and
  priorities?
• Basis for perceived competitive superiority How
  do your customers define your product or service
  as superior?
• Key profit drivers What makes your product or
  service profitable?
• Product portfolio Interrelating a product or
  service with the above four points.

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Breakdown Relative to New Strategies
External Analysis
Vision
Internal Analysis
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Tactics and Their Implementation

• Strategies are passed down from Senior Management
  to various employees in the organization.
• These employees use their various skills to
  implement these strategies. The implementation
  is called a tactic.

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Business Plan

• The business plan could be a very broad subject,
  but here is one possible explanation
• A business plan can be formed by analyzing the
  successful tactics implemented by a company.
• The tactics provide details as to how the company
  should allocate its resources.

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Summary of Progressive Corporations Strategies

• Change the definition of the business and
  financial objectives to ensure long term success.
• Change the primary market segment they would
  serve.
• Streamline internal operations.
• Create new information systems to accommodate
  their new business strategies.

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Conclusions

• 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.

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Chapter 7

• Implementing a Vision
• Strategy, Tactics and Business Plan

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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
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Primary Business Challenges

• Deciding what things are worth doing.
• Getting things done!

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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.
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When 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.
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Defining the Three Key Elements

• 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.

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Business Strategies!?
How important are they, really?
Do business strategies really make a difference
between success and failure of a company?
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Business 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.
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Business 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.
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Need to ask the following questions

• What is driving competition in our industry or
  one that we might enter?
• What actions are competitors likely to take and
  what is the best way to respond?
• How will our industry evolve over time?
• How can we be best positioned to compete in the
  long run?

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Strategy Consistency?

• Internal Factors
• Resource Factors
• Environment Factors
• Communication and Implementation Considerations

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Strategy Consistency?
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 companys ability to change?
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Strategy Consistency?
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?
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Strategy Consistency?
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?
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Competitive Strategy Process
A. What is the company doing now? Current
strategy? Assumptions about the companys
relative position, strengths and weaknesses,
competitors and industry trends.
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Competitive Strategy Process
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?
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Competitive Strategy Process
C. What should the company do? Test the
assumptions and strategy. Consider alternative
strategies. Chose the strategy that best relates
to the companys situation relative to external
opportunities and threats.
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IEA
Internal External Action
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Progressive Corporation

• 1988 Performance
• Record Revenue
• Record Earnings
• Outstanding Company Culture
• Highly Respected Business Leader
• Well Regarded Company
• Could Things Possibly Be Better?

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Progressive 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
  Progressives Niche Market for the First Time.

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Progressive Corp. Business
Progressive decided that it was really in the
business of reducing human trauma and economic
costs of auto accidents.
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Progressive Corp. Vision
We seek to be an excellent, innovative, growing
and enduring business by reducing the human
trauma and economic costs of auto accidents in
cost-effective and profitable ways that delight
customers.
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Progressives 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.

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Progressives New Business Strategies

• Curtail Diversification.
• Reduce Operating Expenses.
• Assign Business Process Ownership.
• Establish a New Employee Compensation System.

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IS Support of New Strategies

• Express Quote Service.
• Immediate Response System.

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Vision, Customer Value Proposition, Core Values
and Objectives
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.
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Progressive
Customer Value Proposition Our customer value
proposition provides a litmus test for customer
interaction, relationships and innovation.
Fast, Fair, Better Thats 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.
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Progressive
Core Values Progressives 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.
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Progressive 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
Progressives ambitious objectives and our
peoples personal and team objectives. We
evaluate performance against all these
objectives.
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Progressive 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.
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Peter Lewis
Currently Chairman of the Board We sell speed,
not insurance.
Glenn Renwick, President and Chief Executive
Officer Raymond Voelker, Chief Information Officer
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IS 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
dont know how you can help. Im not even sure
what your role is in all of this replied the VP
of Marketing.
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Information Technology Impact
Information Technology
Work
Information
Organization
People
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Information Technology Impact
Semi-automated batch system (out-dated)
Increased complexity for route salesman and plants
Information Technology
Work
Information
10 day information float
Organization
People
Route Salesman
Regional Competitors
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Information Technology Impact
Communications Network and Hand-held Computer
Increased complexity for route salesman and plants
Information Technology
Work
Information
Reduced information float to 24 hours
Organization
People
Route Salesman Account Specialist Merchandiser
Decentralized Marketing Organization
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Yum! Brands
KFC Pizza Hut Taco Bell Long John Silver All
American Food (AW)
Created as Tricon Global Restaurants on October
6, 1997 as a spin off from Pepsi.
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Yum! Brands
The worlds largest quick service restaurant
company with nearly 33,000 units in more than 100
countries. 36 are outside the US
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2002 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.

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Long Term Goals

• To be the premier global restaurant company.
• Transform the Quick Service Restaurant industry
  with multi-branding.
• Become the best restaurant company investment.

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Business Strategies

• Drive International Growth
• Multi-brand Great Brands
• Improve Operations of Brand Portfolio with
  Customer Mania

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International 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.
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International 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.
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International Challenges

• Customer food preference and taste.
• Standard of livingproduct cost.
• Currency fluctuations.
• Brand strength and unit consistency.
• Distribution system.
• Building an international team for the company.

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Multi-branding
McDonalds has been the envy of this industry
since its units average 1.6 million a year
(almost twice that of Yum!)
Multi-branding gives customers more choices and
variety.
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.
Pasta Bravo will be tested as a multi-brand with
Pizza Hut.
40 of multi-branding is being done by
franchisees.
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Improving Operations
Training 840,000 employees each quarter on how to
be customer maniacs.
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The Three Components of a New Strategy
Vision
Internal Assessment
External Assessment
A New Strategy
Figure 7-1
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Strategy Considerations

• Competitive Environment
• Market Target
• Basis for Perceived Competitive Advantage
• Key Profit Drivers
• Product and/or Service Portfolio

Hello, Porter Competitive Model!
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Additional 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.

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Strategy-to-Tactics Implementation

• 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.

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Managing for Results

• Objectives
• Authority
• Responsibility
• Training
• Motivation
• Performance
• Results
• Reward

Control
Figure 7-4
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Strategy Implementation
Senior Management
Vision
Business Uncertainties
and Macro Strategies
Empowered Implementers
Company Culture
Micro Strategies and Tactics
Risks to be Avoided
Critical Performance Factors
Key Enterprise Business Processes
Figure 7-3
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Information Needs
Senior Management
Emerging Opportunities and Threats
External Impact of Strategies and Tactics
Internal Impact of Strategies and Tactics
Performance Measurements
Empowered Implementers
Figure 7-5
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Strategic Management Process
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Competitive Analysis
What the competitor is doing and can do Current
Strategy How the business is currently competing
What drives the competitor? Future Goals At all
levels of management and in multiple dimensions
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?
Assumptions Held about itself and the industry
Capabilities Both strengths and weaknesses
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SWOT 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
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SWOT Analysis
Vision Goals Company Values Financial Status Cash
Position ROI Position Societal Demands Competition
Core Competencies People Skills Overall Resources
Strengths Weaknesses Opportunities Threats
Suggest strategies that should be tested against
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Strategies can be relatively simple.
Implementation is often the major challenge.
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A Logical Approach

• Find a tactic that will work.
• Build it into a strategy.

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Employee downsizing, right-sizing or dumb-sizing
(take your choice) should not be based solely on
cost cutting.
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Smart 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.

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Company Infrastructure

• Data Management
• User Applications
• Voice Management
• Network Management
• Plan Process
• Financial Strategy
• Organization

Figure 7-7
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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
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IT Based Strategies
MARKET PLACE
OPERATIONS
Federal Express USA Today Charles Schwab
Whirlpool Xerox
SIGNIFICANT STRUCTURAL CHANGE
BancOne Boeing Frito-Lay Wal-Mart
USAA L.L. Bean McKesson
TRADITIONAL PRODUCTS AND PROCESSES
Figure 7-6
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Which Way Should the Arrows Go?
Business Vision and Strategies
Right Sizing
Total Quality Management
Re-engineering
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Conclusions

• 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.