Business Cases and Zara

1
Business Cases and Zara
2
Today's Schedule

• 8/100 Introductory Remarks
• 8/110 Debrief from Goldratt
• 8/150 - Quiz Break
• 9/210 - Justifying IT Investments
• 10/330- Break
• 10/340 - Zara
• 11/440- Self Reflection

3
Beyond the Goal

• Goldratt on how IT delivers value...

4
The search for the new rules

• 1. What is the main power of the technology?
• 2. What limitation does it diminish?
• 3. What rules helped us to accommodate the
  limitation?
• 4. What rules should we use now?

5
Beyond the Goal

• I think that Dr. Goldratt and Hammer and Champy
  have slightly different ways of looking at some
  of the same problems. Goldratt is very focused on
  finding the limitations and the rules that
  support them rather than Hammer and Champy's view
  that you should look past the current
  understanding/limitations of new technology. I
  had a reaction similar to Kristen's when I read
  the chapters, but think that they are both
  relevant. Goldratt is helping you find the
  limitations in the process and HC are looking at
  perceived limitations in technology. It may be
  that you can solve a limitation in process by
  using an existing technology in a new way. -DM
• Any examples of this at Vasa? Fabritek? Zara?

6
Beyond the Goal

• Goldratt on the long tail of project mgmt...

7
The prevailing rule of project managementThe
way to ensure that the project will finish on
time is to try to make every task finish on time.
time
50
80
50
80
The higher the uncertainty the bigger the tail!
8
D Choose estimates higher than 80.
B Meet commitments.
A Be considered a reliable person.
C Dont exaggerate.
D Choose estimates close to 50
9

• The wrong rule of project management
• The way to ensure that the project will finish on
  time is to try to make every task finish on time.

• The new rules
• Dont turn estimates into commitments.
• Move the protection from the task level to the
  project level.
• Use buffer management to set priorities.

10

• On my last job, we as team budget our task
  accordingly, we do not take into account the
  murphy's law. If something unexpected did come
  up, we moved the unfinished task into the next
  milestone. The management team understood this
  and we were never penalized for missing a few
  task deadlines because there were times when we
  managed to finish our task ahead of schedule. I
  guess this is the kind of protection that is set
  at the project level and I think it works much
  better than protection that is set at task level.
• Another point that Dr. Goldratt made was that
  people want to be seen as responsible and
  trustworthy. Ironically, this has an unfortunate
  consequence on project management. People who
  finish their project early get penalized and
  being labeled untrustworthy. Hence, instead of
  rewarding hard working and diligent workers, the
  management usually see them as being overly
  exaggerating in their project estimate. Thus, the
  company can't reap the full benefit of these
  workers because they chose to do useless and
  unproductive task in order to make the project
  completion date nearer to the estimated time. RP

11
Beyond the Goal

• Goldratt on holistic process change...

12
1. Improving only one link may cause problems in
another.

• Why a holistic approach?

2. Improving only one link may cause problems for
the link that improved.
3. Improving only one link is definitely a waste
of major benefits.
13

• I do not disagree that holistic change can be a
  silver bullet for an organization. However, this
  type of change can be too massive for many
  organizations. The holistic approach hopes to
  change the way a company operates. For this kind
  of change to occur from the ground up, the
  organization must be ready and willing to undergo
  restructuring. I do not believe the changes at
  Cadillac is an example of BPR. I do not think the
  changes were intensive enough. -MY
• How about the Vasa? Fabritek? Zara?

14
Quiz
15
Justifying IT Investments

• Common Experiences with IT Justification

16
Whats the Problem?

• How many systems do you interface with as a
  student at PU?
• Which of them do you find useful in performing
  your job as a student?

One of the major challenges faced by
organizations is prioritizing, evaluating, and
upgrading IT systems. Today we will examine a
few ways of thinking about such decisions.
17
Whats a Business Case?

• The economic and organizational logic and
  rhetoric that justifies an IS investment.
• A good business case is
• addressed to a known business problem
• in sync with strategy
• capable of standing on its own
• able to convince an objective audience of the
  value of the investment.

18
Common considerations
Common considerations
19
Common Causes
Common Causes
20
Common Business Drivers

• Tangible benefits
• Increased productivity
• Lower operating costs
• Reduced work force
• Lower fixed or operational assets
• Lower vendor procurement costs
• Lower clerical/professional costs
• Reduced growth of expenses
• Reduced facility costs
• Enhanced growth capacity

• Intangible benefits
• Improved asset use resource control planning
• Increased flexibility
• More timely information
• Increased learning
• Attain legal requirements
• Enhanced employee goodwill, job satisfaction
• Decision making, operations
• Higher client satisfaction
• Better corporate image

21
Looking at Business Cases

• What was your teams assessment of the CPI
  business case?

Would you approve the 350,000 based on this
business case?
22
Common Justification Strategies - 4 Fs
Common Justification Strategies - 4 Fs
23
Justification Strategies and Understanding
Understanding of Problem/Process
High
Understanding of IT/Solution
Low
High
Low
24
Mapping the Fs

• In your teams, take a few minutes to analyze the
  CPI Business Case looking for examples of each of
  the four Fs.
• Write examples of each on the boards.

25
A Needed Shift in Thought Process.
A Needed Shift in Thought Process.

• Competition for IT and Business resources
• Business Cases not clearly comparable
• Alignment to Business and IT strategy unclear
• Financial worth open to interpretation
• Sponsored by those who do the work

www.pmiovoc.org
26
Time Out!
27
(No Transcript)
28
Zara

• On the Spot
• Map their Order/Inventory Process be sure to
  identify bottle necks and capacity limiters.
• What current or potential weaknesses (if any) do
  you see in Zaras IT infrastructure and IT
  strategy?
• What benefits does Inditex / Zara get from its IT
  infrastructure? How difficult would it be for a
  competitor to acquire these same benefits?
• How would you advise Salgado to proceed on the
  issue of upgrading the POS terminals? Should he
  upgrade to a modern operating system?

29
Where does ZARA go from here?
30
MY POSITION

• Not completely utilizing IT to manage their
  business. Instead theyre using technology just
  to get by. Similar to their advertising/marketing
  approach.
• Their mission statement is, ZARA walks at the
  pace of society, dressing ideas, trends and
  tastes that society itself has matured.
• Theyre driving in the slow lane on the
  information super highway!!! They have their
  flashers on and are towing some heavy equipment!!!

31
Or, from the other perspective
32
If It Aint Broke Dont Fix It..
33
Whats the problem?
34
Whats our strategy?
35

• What are the 4 Fs for this case?

36
Conclusion

• As Goldratt says, IT adds value IFF it
  simultaneously removes a limitation. Whats the
  limitation here? Is it our strategy or our
  process?
• A new system will not, by itself, change the old
  rules in place at Zara.
• A POS business case must have FACTS, not just
  FAITH FOLLOW.

37
Case Objectives

• To show how one company made brilliant use of
  multiple information channels
• Subjective and objective information.
• Qualitative and quantitative
• Phone, face-to-face, e-mail, and modem.
• To highlight the inside-out approach to selecting
  IT.
• To discuss not What can we do?, but What do we
  need to do? instead.
• To demonstrate how information and IT support a
  business model.

38
Final Project

• Review the Rubric and Length Reqs.
• Level of Analysis Issues
• Focus on a FIRM, not an INDUSTRY
• Eg. A firm focus examines a process
  change/technology at a firm and how they
  implemented/changed their processes.
• An industry view examines an overall trend and
  how technology affects a process in theory.

39
Self Reflection
40
The End
41
Final Project

• Take a few minutes to review your project with
  your team. I would like to meet with each team
  for a few minutes to review your current plan and
  offer any advice for you to succeed.

42
Unused Slides
43
Evaluating and ValuingIT Investments
(Freedman, 2003)?

• The benefits and costs are often unpredictable.
• The interaction of the systems can often create
  unintended consequences.
• IT systems provide benefits that are less
  tangible than those produced by other business
  assets.

44
Zara Background Summary

• In 2003, Zaras CIO needed to decide whether to
  upgrade the retailers IT infrastructure and
  capabilities.
• At that time, the company relied on an
  out-of-date operating system for its store
  terminals and had no full-time network in place
  across stores.
• Despite these limitations, Zaras parent company
  (Inditex) built an extraordinarily
  well-performing and responsive value chain.

45
Zaras IT Infrastructure

• No Chief Information Officer.
• No process for setting an IT budget.
• No process for deciding on specific IT
  investments.
• Preference for writing IT applications
  themselves.
• Stores had multiple PDAs and POS systems.
• Unchanged environment for 10 years.

46
Team Discussion Questions

• Team 1 How would you advise Salgado to proceed
  on the issue of upgrading the POS terminals?
  Should he upgrade to a modern operating system?
• Team 2,5 Should the POS applications be
  re-written to include any additional
  functionality? If so, what functionality?
• Team 3 In your opinion, what are the most
  important aspects of Zaras approach to
  information technology?
• Team 4 Are these approaches applicable and
  appropriate anywhere? If not, where would they
  NOT work well?

47
Class Discussion Questions

• What benefits does Inditex / Zara get from its
  IT infrastructure? How difficult would it be for
  a competitor to acquire these same benefits?
• What current or potential weaknesses (if any) do
  you see in Zaras IT infrastructure and IT
  strategy?
• Should they consider small changes first
  (Dashboards ERP -- CRM), then approach larger
  implementations?
• OR, should they implement it all at once
  (Transformation)?

48
Evaluating and ValuingIT Investments
(Freedman, 2003)?

• Creating a business case
• Business drivers what is the problem and what
  is it worth to solve?
• Alignment What are the strategic objectives?
• Product What technical and operational
  deliverables?
• Sponsors and stakeholders - Who is asking for
  this project? Who is willing to own its risks
  AND reward?
• Justification What do we think it will cost?

Each of these issues should be address in your
final project.
49
Evaluating and ValuingIT Investments
(Freedman, 2003)?

• IT Valuation Methodologies
• Rapid Economic Justification
• Understand the business.
• Understand the solutions
• Understand the cost-benefit equation
• Understand the risks
• Understand the financial metrics.
• Portfolio Management
• Take inventory What are we doing?
• Analyze Do these projects make sense together?
• Prioritize - Using agreed methods, prioritize
  each project
• Manage Keep tabs on current issues and concerns.

50
Evaluating and ValuingIT Investments
(Freedman, 2003)?

• Post-investment Value Analysis
• Quantitative approaches
• Qualitative methods (Balanced Scorecards)?

51
Evaluating and ValuingIT Investments
(Freedman, 2003)?

• How should you prepare yourself?
• Incorporate the development of the business case
  for every new project you take on.
• Familiarize yourself with quantitative and
  qualitative disciplines.
• Practice on a current project or in a friendly
  environment.
• Promote your ability to advise clients on IT
  investment metrics.
• Think about entering into gain-sharing or risk
  reward project relationships.

52
Prioritizing IT Investments

• In your teams, write a 1-2 page response to that
  question in the context of the systems RCCL is
  considering. Be sure to include
• Pre-project review/justification
• Post-project review/management
• Strategic role/alignment