What’s Happening?!What’s Happening?!

AOL Time Warner reported the largest corporate loss for a single year EVER!

Grey Davis is considering making Internet-based businesses to pay sales taxes on all of their sales.

Midterm ExamMidterm Exam

1. Must answer essay question 30 pts.

2. 1 of 2 essay questions 20 pts.

3. 5 of 6 single topic essay questions 50 pts

You will have the entire class for the exam.

I will provide paper—you provide answers.

Chapter 6 SummaryChapter 6 Summary

Business Vision

What is a Vision?What is a Vision?

A Photograph of the Future

Why A Good Vision?Why A Good Vision?

It Establishes a clear direction of the company for the future.

Provides a basis for sharing values and views.

It sells the company on itself.

How Important Is a Vision?How Important Is a Vision?

This is one of the reasons that companies pay their CEOs so much money.

The right CEO with the right vision can make a major difference.

Cases In PointCases In Point

USAA Whirlpool

“The most important thing that I do is to make sure that people within USAA know where we are going. They can then make day-to-day decisions consistent with that direction.”

Bob McDermott, USAA

USAA: What happened?USAA: What happened?

General Robert F. McDermott took over Over the course of 24 years:

– Assets increased from 206 million to 31 billion (150 times)

– Annual Revenue increased from 143 million to 5.3 billion (37 times)

– Customer Base increased from 653,000 to 2.4 million. (4 times)

How did it happen?How did it happen?

Improved member service by:– Automating policy writing system– Reducing the number of employees– Upgraded employee quality via education and

training.– Decentralized decision making and empowered

employees.– Implementing a leading-edge image processing

system.

Expanded ServicesExpanded Services

New Major Business Opportunities:– Insurance Products—added life insurance– Consumer Services Products—plus travel

services – Financial Services Products including a Savings

and Loan

Role of Information SystemsRole of Information Systems

Information Systems are strategic weapons,

not cost centers.

Information Systems Evaluation Criteria:

1. Customer convenient

2. Operator efficient

3. Cost effective

Whirlpool’s VisionWhirlpool’s Vision

To become the global leader in the large

appliance industry.

TranslationTranslation

Doing what we do, we will improve and

expand by making customers happy.

We will follow the demands of the market,

and be efficient and profitable.

Why Global?Why Global?

Less growth opportunity in North America.

Only real option to increase revenue.

Implementation of VisionImplementation of Vision

Purchased Phillips Electronics N.V., placing Whirlpool in Europe

Practice the strategy of ‘Think Global, Act Local’

Hired new executives with global experience.

Standardized products. Major new emphasis on the role of

information systems.

Why Have a Vision?Why Have a Vision?

Provide Direction

The Vision ProcessThe Vision Process

1: Define the Business Environment

2: Build Company Vision

3: Turn the Vision into a plan.

Possible Exam QuestionsPossible Exam Questions

1. How would a company go about determining a new vision?

2. What major challenges would a company encounter to establish a new vision successfully?

Chapter 7 IntroductionChapter 7 Introduction

Implementing a Vision: Strategy, Implementing a Vision: Strategy, Tactics and Business PlanTactics and Business Plan

Chapter ObjectiveChapter Objective

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

A New Business StrategyA New Business Strategy

New business strategies are based on three

components:

1. Vision

2. External assessment

3. Internal assessment

Strategic Management ProcessStrategic Management Process

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysis

Vision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Strategy-to-tactics ImplementationStrategy-to-tactics Implementation

Senior Management

Strategy ImplementationStrategy Implementation

Visionand MacroStrategies

Empowered Implementers

MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

The Business PlanThe Business Plan

The part of the process that deals with the allocation of resources – money (capital and expense funds) and head count (people).

An information-oriented infrastructure is An information-oriented infrastructure is key to a responsive competitive strategykey to a responsive competitive strategy

Company Infrastructure• Data Management

• User Applications

• Voice Management

• Network Management

• Planning Process

• Financial Strategy

• Organization

ConclusionsConclusions

1. Business strategies do not compete with the use of information systems. The goal is for them to become successful with the support of information systems.

2. Information systems can never be successful as a competitive resource if they do not support the right business strategies.

Chapter 7 Chapter 7

Implementing a Vision:

Strategy, Tactics and Business Plan

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

Primary Business ChallengesPrimary Business Challenges

• Deciding what things are worth doing.

• Getting things done!

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.

When in DoubtWhen 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.

Defining the Three Key Defining the Three Key ElementsElements

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.

Business Strategies!?Business Strategies!?

How important are they, really?

Do business strategies really make a difference between success and failure of a company?

Read-Rite Corp.Read-Rite Corp.

1. Cash flow problems

2. Largest customer was getting out of disk drive

manufacturing.

3. Increasing threat of Japanese competition.

4. Limited customers dictates the need to exploit the

Japanese market.

Strategic SolutionsStrategic Solutions

1. Formed a joint venture with Sumitomo Metal Industries and

received $30 million investment in Read-Rite as part of the

agreement.2. Used the credibility of the joint venture to purchase the

manufacturing facility of its largest customer through a

transfer of equity in Read-Rite and signed a long-term

agreement to supply disk heads to the customer.

3. Went public (sold stock) and raised a significant amount of

capital.

4. Invested in a manufacturing facility in the joint venture

company in Japan and initiated a marketing effort in Japan.

Operating GoalsOperating Goals

1. Attain highest customer satisfaction in the industry.

2. Provide just-in-time technology.

3. Achieve lowest possible cost.

4. Attract, attain and develop the best team in the

industry.

5. Enhance shareholder value.

Progressive CorporationProgressive Corporation

1988 Performance• Record Revenue

• Record Earnings

• Outstanding Company Culture

• Highly Respected Business Leader

• Well Regarded Company

• Could Things Possibly Be Better?

Progressive CorporationProgressive 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 Progressive’s Niche Market for the First Time.

Progressive Corp. BusinessProgressive Corp. Business

Progressive decided that it was really

in the business of reducing human

trauma and economic costs of auto

accidents.

Progressive Corp. VisionProgressive Corp. Vision

We seek to be an excellent, innovative,growing and enduring business by reducingthe human trauma and economic costs of auto accidents in cost-effective and profitableways that delight customers.

Progressive’s New Business StrategiesProgressive’s 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.

• Curtail Diversification.

• Reduce Operating Expenses.

• Assign Business Process Ownership.

• Establish a New Employee Compensation

System.

Progressive’s New Business StrategiesProgressive’s New Business Strategies

IS Support of New StrategiesIS Support of New Strategies

• Express Quote Service.

• Immediate Response System.

Vision, Customer Value Vision, Customer Value Proposition, Core Values and Proposition, Core Values and

ObjecitvesObjecitves

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.

ProgressiveProgressiveCustomer Value Proposition:

Our customer value proposition provides a litmus test for customer interaction, relationships and innovation.

Fast, Fair, Better

That’s 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.

ProgressiveProgressive

Core Values:

Progressive’s 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.

Progressive Core ValuesProgressive 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 Progressive’s ambitious objectives and our people’s personal and team objectives. We evaluate performance against all these objectives.

Progressive Core ValuesProgressive 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.

Peter LewisPeter Lewis

Currently Chairman of the Board

“We sell speed, not insurance.”

Glenn Renwick, President and Chief Executive Officer

Raymond Voelker, Chief Information Officer

IS Exec Identity CrisisIS 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 don’t know how you can help. I’m not even sure what your role is in all of this” replied the VP of Marketing.

Information Technology ImpactInformation Technology Impact

Information Technology

Work

OrganizationPeople

Information

Information Technology ImpactInformation Technology Impact

Information Technology

Work

OrganizationPeople

Information10 day

information float

Route Salesman Regional Competitors

Increased complexity for route salesman and plants

Semi-automated batch system (out-dated)

Information Technology ImpactInformation Technology Impact

Information Technology

Work

OrganizationPeople

InformationReduced

information float to 24

hoursRoute SalesmanAccount SpecialistMerchandiser

Decentralized Marketing Organization

Increased complexity for route salesman and plants

Communications Network and Hand-held Computer

Diversification Logic?Diversification Logic?

• ITT into Continental Baking.

• Sony into Hollywood (Tristar)

• PepsiCo into restaurants (Taco Bell, KRC and

Pizza Hut)

• PepsiCo into Wilson sporting goods and two

freight companies

• Viacom into retailing (Blockbuster)

• Xerox into insurance (Chubb and Forrester)

• Southern California Edison into sporting goods

A Valid Theory of BusinessA Valid Theory of Business

• Some theories of business last a long time, but they do not last forever.

• A theory of business becomes obsolete when the company achieves its original objectives.

• Any company that doubles or triples in size in a short period of time has outgrown its original theory.

•

A Valid Theory of BusinessA Valid Theory of Business

• The first signs of fundamental change rarely appear among customers. They show up among non-customers.

• Unexpected failure is as much a warning sign as unexpected success and must be taken seriously.

Toyota DiversificationToyota Diversification

At a time when diversification is often suspect, Toyota, guided by a historical perspective, is moving into other areas such as prefab housing and especially telecommunications.

Toyota PerspectiveToyota Perspective

The company’s plan is driven by historical cycles dating to the 1700s that suggest that a single line of business rarely prospers for more than sixty years.

“We are not arrogant enough to believe that the automobile business can be profitable perpetually.”

The waves of change are reflected in the dominant infrastructure of the time.

In 2000 they achieved 10% of sales ($10 billion) to come from outside the auto and truck business.

Prevailing InfrastructurePrevailing Infrastructure

1800 Canals

1850 Railroads

1900 Highways

1950 Telecommunications

InternalAssessment

ExternalAssessment

The Three Components of a New Strategy

Vision

A New Strategy Figure 7-1

Strategy ConsiderationsStrategy Considerations

• Competitive Environment

• Market Target

• Basis for Perceived Competitive Advantage

• Key Profit Drivers

• Product and/or Service Portfolio

Hello, Porter Competitive Model!

Additional ConsiderationsAdditional 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.

Strategic Management ProcessEnvironmental Analysis

General Environment

Operating Environment

Competitive Positioning

Directions for Development

Company Analysis

Structure

Values/Culture

Skills

Resources

CompanyStrategic History

CurrentStrategy

StakeholderAnalysis

Vision &Strategy

ChosenStrategy

RealizedStrategy

CompanyVision

Reprinted with permission fromThe Strategic Management BlueprintCambridge, Ma: Blackwell, 1993.Figure 7-2

Competitive AnalysisCompetitive Analysis

What drives the competitor?

Future Goals

At all levels of management and in multiple dimensions

What the competitor is doing and can do

Current Strategy

How the business is currently competing

Assumptions

Held about itself and the industry

Capabilities

Both strengths and weaknesses

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?

SWOT AnalysisSWOT 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

SWOT AnalysisSWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Suggest strategies that should be tested against

Vision

Goals

Company Values

Financial Status

Cash Position

ROI Position

Societal Demands

Competition

Core Competencies

People Skills

Overall Resources

Six Strategy Responses

1. Retreat to core businesses and outsourcing

non-core services.

2. Redefining the entire nature of the business.

3. New forms of association or alliances.

4. Changing products and/or services.

5. Reengineering business processes.

6. Recognizing the need for information.

Strategies can be relatively simple. Implementation is often the major challenge.

A Logical ApproachA Logical Approach

• Find a tactic that will work.

• Build it into a strategy.

Employee downsizing, right-sizing or

dumb-sizing (take your choice)

should not be based solely on cost

cutting.

Smart SizingSmart 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.

Essential to Run a Business 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

Senior Management

Strategy ImplementationStrategy Implementation

Visionand MacroStrategies

Empowered Implementers

MicroStrategies

and Tactics

Company Culture

Risks to be Avoided

Business Uncertainties

Critical PerformanceFactors

Key EnterpriseBusiness Processes

Figure 7-3

Managing for ResultsManaging for Results

• Objectives

• Authority

• Responsibility

• Training

• Motivation

• Performance

• Results

• Reward

Control

Figure 7-4

Information NeedsInformation Needs

Senior Management

Empowered Implementers

Emerging Opportunities and Threats

Internal Impact of Strategies and Tactics

External Impact of Strategies and Tactics

Performance Measurements

Figure 7-5

Strategy-to-Tactics Strategy-to-Tactics ImplementationImplementation

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.

Company InfrastructureCompany Infrastructure

• Data Management

• User Applications

• Voice Management

• Network Management

• Plan Process

• Financial Strategy

• Organization

Figure 7-7

IT Based StrategiesIT Based Strategies

MARKET PLACE OPERATIONS

SIGNIFICANTSTRUCTURALCHANGE

TRADITIONALPRODUCTSAND PROCESSES

Federal ExpressUSA TodayCharles Schwab

WhirlpoolXerox

BancOne Boeing Frito-Lay Wal-Mart

USAA L.L. Bean McKesson

Figure 7-6

Re-engineering Total QualityManagement

Right Sizing

Which Way Should the Arrows Go?Which Way Should the Arrows Go?

Business Visionand Strategies

ConclusionsConclusions

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.