What

1
Whats Happening?!

• Fixing Social Security!

2
Fixing Social Security

• President Franklin D. Roosevelt established
  social
• security 70 years ago to help lift seniors out
  of poverty.
• There was no up-front funding.
• The current average annual check is 14,000.
• 2/3 of 36 million seniors count this as half of
  their
• income.
• A financial solvency problem looms as baby
  boomers
• reach retirement age
• Can the stock market help fix the problem?

3
Private Accounts

• Workers would have 1/3 of their payroll taxes put
  into an individual account.
• Social Security returns about 2 a year.
• Like PERS workers would select from various
  investment options.
• The premise is that higher risk investments will
  produce higher returns and result in more
  retirement income.
• Could also encourage additional savings through
  added incentives. i.e. workers under 55 could
  divert 4 of theirs earnings up to 1,000 to a
  private account.
• The private account approach would require the
  federal government to borrow about 160 billion
  for the first two or three years.

4
Alternative to Private Accounts

• Raise the current 6.2 rate or increase the
  taxable amount from first 90,000 to maybe
  150,000.
• Eliminate the current inheritance tax that
  expires in 2010.
• Raise the retirement age from the current 67 for
  those born after 1960 to 70.
• Reduce the payment rate.

5
So what is going to happen?

• Continue to contend that the 3.7 trillion
  financial shortfall wont happen if there is
  decent economic and population growth.
• Politics will play a major role in determining if
  anything will be done.

6
Who is paying federal taxes?
To be in the top 25 of all tax payers you need
to earn
52,965.
To be in the top 50 of all tax payers you need
to earn
26,415
7
Who is paying federal taxes?
Percentiles Share of AGI of Fed.
Taxes Paid Top 1 19.5 36.2 Top
5 34.0 55.5 Top 10 44.9 66.5 Top
25 66.5 83.5 Top 50 86.8 96.0 Bottom
50 13.2 4.0
8
Course Schedule
Section I and II of ATP is due a week from today,
Feb. 1.
Midterm exam is a week later on Feb. 8. Midterm
exam clinic on Wednesday, Feb. 2 at 4 to 5 PM.
9
Paper Objective

• The battle between digital and analog continues.
  Actually it
• is not much of a battle since digital always wins
  because of
• accuracy and the fact that it is more cost
  effective. This was
• the case with telecommunications and is becoming
  the norm
• for an increasing number of consumer products.
  Media is
• becoming digital such as cameras, DVDs, music and
  
• television. For this reason the traditional
  distinction between
• computers and consumer products is gone. This
  results in a
• competitive battlefield between computer
  companies like
• Apple, HP and Dell and consumer product companies
  like
• Sony, Phillips and Matsushita.

10

• Their goal is to maximize their role in providing
  a wide range
• of digital capabilities. It is the intent of
  this paper to evaluate
• this competition with a specific focus on Apple
  Computer.
• There is not an established industry term to
  identify this new
• competition, digital hub industry will be used
  throughout the
• paper.
• To accomplish this analysis section I will
  describe the
• industry and the major competitors. Section II
  will . . .

11
Digital Hub Industry

• The personal computer is transforming itself into
  the hub of peoples digital lives.
• The PC industry is pursuing growth on a broader
  consumer front while the consumer product
  industry is recognizing the disappearance of the
  distinction between their products and computers
  and its related potential.
• So they are meeting somewhere in between.
• The key to market opportunity is to figure out
  how to make the technology easy to use by the
  average consumer and not just computer gurus.

12
Digital Hub

• Personal Computer.
• Internet Access.
• Video Recorder.
• DVD video player.
• MP3 music server.
• Advanced telephone and fax machine.
• Digital photography and video hub.
• Video chat via the TV screen.

13
Major Competitors

• Traditional computer companies
• Apple
• Dell
• Hewlett-Packard
• Gateway
• Microsoft

• Traditional Consumer Product Companies
• Sony
• Matsushita Electric
• Phillips
• Numerous smaller niche companies

14
Digital Hub Industry

• Traditional Computer Service Companies
• AOL
• Yahoo
• Service organizations of computer companies.

Potential New Entrants Media companies
Substitutes Services versus equipment
15
Chapter 5 Summary

• Information Systems Can
• Redefine Competitive
• Boundaries

16
Major Chapter Messages

• Network-based systems (interorganizational
  sytems) are providing the vehicle to create
  alliances between multiple companies to
  strengthen their competitive positions.
• This approach frequently dictates the need for
  on-going communication that is possible through
  the network links.
• Extranets through the use of Internet technology
  have become the preferred way for new efforts.
• EDI systems remain unless company needs or
  priorities change.
• Dell Computer is the role model for these types
  of systems because of their success with the
  direct business model.

17
How does this chapter fit within the bigger
scheme of things?

• Networks are the delivery vehicle for business
  communication
• traffic.
• Representative of the companies we are
  evaluating
• Dell Direct business model.
• Intel Rosettanet link with customers.
• Knight-Ridder Links for news article between
  31
• newspapers.
• Plantronics Links with distributors.

18
Interorganizational Systems

• Better customer service
• We are available.
• We are interested in you.
• We are responsive.
• You can count on us.
• We want to earn your trust and respect.

19
Strategic Alliances

• Why?
• Tough for a company to face the challenges of a
  global market by itself
• Enables a company to build combined capabilities
  to make it a stronger competitor
• Creation of an extended enterprise Us Versus
  Them

20
Interorganizational Systems


Figure 5-1
Customers
Vendors
Company
Support Services
Business Partners
Industry Forces
Competitors
21
Strategic Alliance Objectives

• Providing access to a new product or geographic
  market
• Significantly improving a position in an existing
  market
• Accelerating the time to bring new products to
  market
• Dramatically changing product cost structure

22
Alliances Provide Growth Opportunities

• Considerations when going global
• Who are your customers?
• Can you tailor your products to specific markets?
• How do you deal with foreign competitors?
• Do you have the skills and resources necessary to
  compete outside of your home market?

23
EDI and/or Extranets

• More of a business than technical issue
• Can improve relationships between a firm and its
  partners
• Implementation obstacles along the lines of
• Data
• Communications
• Applications
• Business Processes

24
Conclusions

Three ways to extend the capabilities of an
enterprise through the use of IT

• Interorganizational systems
• Multiple forms of strategic alliances
• 3) Business process changes involving customers
  and suppliers

25
Possible Exam Questions

• Explain the term extended enterprise and the
  possible benefits for a company in attempting to
  establish a better competitive position.
• Explain and contrast the current extranet
  emphasis with the more traditional EDI approach.

26
Chapter 6 Introduction
Business Vision
27
Chapter Goal

• The intent of this chapter is to position vision
• as the starting point in directing, posturing,
• and running a business.

28
Chapter Specifics

• Define and understand vision
• Two successful company examples
• USAA
• Whirlpool
• Conclude with the importance of vision

29
What is a Vision?

• A vision is a photograph of what the company
  wants to be look like in the future.
• A vision is realistic, credible, and attractive.
• Not a dream, but something achievable.
• Must be concrete and easy to understand.

30
The Uncertainties of a Vision

• The dynamics of the market (customers)

• Rapidly changing technologies that frequently
  offer new product life cycles

• The logic and need to address changing employee
  values and traditional ways that work is done

• The shift from the old to new regulatory
  practices in many industries

31
The Vision-to-Action Process
Implementation (Action)
Figure 6-1
Agreement and Commitment
Tactic and Business Plan
Strategy
Vision
Sensing Opportunity
32
USAA and Whirlpool

• Two organizations that successfully implemented a
  vision process

33
A Leader With a Vision
General Robert F. McDermott, CEO of USAA, and his
vision
To become a company that provides the best
possible customer service. Our goal is to
become a paperless insurance company. We may
never get there, but that is where we are going.
34
Customer Service and Employees

• Customers keep the company running
• Customer service is the vision driver
• Service comes before either profits or growth
• The Golden Rule to serve others as you would
  want to be served
• Employees make the vision happen
• Quality service comes from employees
  satisfaction with the company and work place.

35
Whirlpool Corporation
The Worlds
Largest
Manufacturer and Marketer of Major Home Appliances
New CEO, David Whitwam in 1987, first initiated
his vision in 1988 to become the global leader in
the large appliance industry.
36
The Whirlpool Global Vision
Whirlpool, in its chosen lines of business, will
grow with new opportunities and be the leader in
an ever-changing global market. We will be
driven by our commitment to continuous quality
improvement and to exceeding all of our
customers expectations. We will gain
competitive advantage through this, and by
building on our existing strengths and developing
new competencies. We will be market driven,
efficient and profitable. Our success will make
Whirlpool a company that worldwide customers,
employees and other stakeholders can depend on.
Whirlpool 1993 Annual report.
Think Global But Act Local
37
In Conclusion

• As General McDermott said, How do you know what
  you should be doing today, if you dont know
  where you are going?

38
Chapter 6

• Business Vision

39
CEO Job Description
The primary job of a CEO is deal with the
long-term viability of the business.
Leaders combine vision with communication that
leads to a shared purpose.
A leader sets the vision which is different from
being a visionary.
40
The essence of competitiveness is vision,
leadership and a hunger to succeed.
P. R. Vagelos Chairman and CEO Merck
41
A Business Vision

• A vision is a photograph of the future.
• It is a self-image that deals with what the
  business wants to look like over the long range
  future.
• Business visions are realistic, credible and
  attractive to people within the organization.

42
Jack Welch Vision for GE
His vision was for GE to become the most
competitive enterprise on earth.
He wanted to create a small company spirit in a
big company, to build an organization out of an
old line industrial company that would be high
spirited, more adaptable, and more agile than
companies one-fiftieth the size.
He wanted GE to be a company where people dared
to try new thingswhere people felt assured in
knowing that only the limits of creativity and
drive, their own standards of personal
excellence, would be the ceiling on how far and
how fast they move.
43
Larry Ellison Vision for Oracle
To be the world leader in providing software
applications over a network and hardware designed
and priced to serve those needs.
Ellison suggests that the software industry as we
know it today will vanish and be replaced by a
service industry.
44
Microsoft Vision
Empower people through great software, anyplace,
any time and on any device.
45
Values Beliefs Principles
C u l t u r e
Mission Goals
Vision
Strategies
Tactics
Objectives and Measurements
Authority and Responsibility
Business Plan
46
George Bush The Vision Thing

• His inability to grasp "the vision thing" was an
  important part of
• George Bush's undoing in the '92 election but
  he's not the only
• one to have a hard time articulating wishes and
  dreams for the
• future.
• Organizations are frequently brought to crisis
  by conflicts over
• basic issues of mission, values, and vision.
• Without these basic agreements in place, no
  organization is truly
• viable.
• Mission, values, and vision are the glue that
  holds an organization
• together.

47
Gerstners Lack of Vision for IBM
Lou Gerstner caused a stir at his first major
press conference when he declared that the last
thing IBM needed was to proclaim a grand vision.

48
Executive Vision
If a company has restructured, where do they turn
for business performance and financial
improvement?
A broad grounding in a particular industry is a
often a necessary prerequisite to successful
direction setting.
Visionaries can draw a conceptual roadmap to some
imagined future.
49
The most important thing that I have learned is
that the time for a business to go from chump to
champ to chump used to be two to three decades
and now it is five to seven years.
Bill McGowan Former CEO of MCI
50
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
51
A Shared Vision Positions IT
1. Achieves Strategic Synergy. 2. Puts the Onus
on the Owners. 3. Leverages Learning. 4. Extends
Externally. 5. Chucks the Organization Chart. 6.
Indulges in Information. 7. Makes a Bee-line for
Benefits.
52
The Vision Trap
Grand, abstract visions can be too inspirational.
The company may wind up making more poetry than
products.
Gerard H. Langeler President, Mentor Graphics
53
Implementation (Action)
The Vision to Action Process
Agreement Commitment
Tactics and Business Plan
Strategy
Feedback
Vision
Sensing Opportunity
Figure 6-1
54
Vision Examples

• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.

55
If Starting Today
Charles Schwab, Charles Schwab Co. Jeff Bezos,
Amazon.com Meg Whitman, eBay Michael Dell, Dell
Computer Fred Smith, Federal Express Louis
Gerstner, IBM Sam Walton, Wal-Mart Stores
Lee Kuan Yew, Singapore, Inc. Morita,
Sony Peter Lewis, Progressive Corp.
56
USAA

• Financial Services Company.
• Headquartered in San Antonio, Texas.
• A member owned association.
• Started by Army officers who had difficulty
  getting
• insurance.
• Historically managed by former military
  officers.
• Top-rated for customer service and financial
• performance.

57
Information systems are strategic weapons, not
cost centers. Robert F. McDermott,
Former USAA CEO
58
McDermott Leadership

• Increased assets from 207 million to 8.5
  billion.
• Grew customer base from 650,000 to 2.4 million.
• Significantly increased the level of customer
  service.
• Broadened the product base.
• Decreased the high annual employee turnover
  rate.
• Redefined the business from a property and
  casualty
• insurance company to a financial services
  organization.

59
USAA Vision 2000
An Events Oriented Organization
Member (Customer)
Needs
Wants
Key Points Security Quality
Asset of Life
Management
Supporting Insurance Consumer
Financial Systems Products
Services Services
Products
Products
Figure 6-2
60
USAAs ultimate goal is to manage its customer
relationships and not its individual products.
How does this relate to information systems?
61
USAA Products and Services
So integrated that members lose something if they
go elsewhere.
62
USAA Business and IS Goals
1. Customer Convenient 2. Operator Efficient 3.
Cost Effective
63
Information Systems Strategies

• Executive Partnership
• Strategic Architectures
• Technology Experimentation
• External Resource Leverage
• Technology Assimilation
• Horizontal Integration

64
IT at USAA

• 28,000 workstations for 22,709 employees.
• 7 mainframe computers.
• 750 client server systems.
• Own and operate a communications company.
• 4,300 ATT Trunk Lines 94 million annual
  telephone calls representing 90 of business
  transactions.
• 1,300 Information Systems people. (ITCo)

12/31/99
65
USAA Image Processing
Mainframe Computer
A P I
A P I
Folder Management Application
Inner Server
Storage Manager
Direct Access Storage Drive
Document Database Direct Access Storage Drive
API
Token Ring LAN
Application Workstation
On-line Optical Disks
Application Workstation


Service Representatives
Mailroom
Optical Storage Library (Not On-line)
Scanner
Image Workstation
Image Workstation
Figure 6-3
66
USAA Success Conclusions
1. Provides quality service. 2. Attracts, trains,
retains and motivates employees. 3. Aggressively
and successfully uses information technology. 4.
Provides products and services to address the
changing needs of its customers. 5. Maintains
one of the lowest operating expense ratios in
the industry. 6. Achieves financial results that
warrant excellent to superior ratings. 7.
Makes business, organizational and management
changes on a timely basis. 8. Had an
outstanding CEO in General McDermott.
67
Whirlpool Corporation

• Traditionally, a successful, well-managed
  company.
• A new CEO in 1987 who initiated a global vision
  in 1988.
• A global strategy that emphasized
• - Product Technology
• Procurement
• Promoted a theme of Thinking global but acting
  local.

68
Whirlpool Corp.

• Manufactures in 13 countries, has nearly 50
  product
• technology centers and markets products under
  13
• brands in 170 countries.
• Has the patience to allow the global strategy to
  evolve.
• Is the only company with a presence in four of
  the five
• global markets.
• Has realized impressive growth in revenue but
  not profits.
• Has become a new Whirlpool.

69
Financial Performance
1991 - 6.5 billion in global sales 2002 - 11
billion in global sales. 2003 - 11.8 billion in
global sales.
1991 - 353 million in operating profit
2002 - 262 million in operating profit
2003 - 709 million in operating profit
70
Stock Performance
71
Whitwam Statement
We entered 2003 with continuing economic
uncertainty in most of the global markets we
serve. We took the appropriate cost and
productivity actions to deal with that
uncertainty.
We believe that Whirlpools global leadership
position, the companys unique global platform
and innovation activities focused on building
customer loyalty will drive continued performance
improvements in 2004 and beyond.
72
Whirlpool Corporation
Principal Products Automatic Dryers Automatic
Washers Dehumidifiers Dishwashers Freezers Microwa
ve Ovens Ranges Refrigerators Trash
Compactors Room Air Conditioners
73
Who Buys Large Appliances

• Contractors for new homes.
• Home owners for replacements.
• Appliance service businesses.
• Businesses and public sector entities.
• First time appliance buyers.

74
Appliance Brands
Whirlpool Kitchen Aid Roper Whirlpool Kenmore
Manufactured for Sears
Maytag Admiral Hardwick Hoover Jenn-Air Magic
Chef Maytag Norge
GE GE RCA Hot Point
Electrolux Frigidaire Gibson Elna Eureka Kelvinat
or OKeefe and Merritt Tappan White-
Westinghouse
75
Differentiation Strategy!?

• Clothes Management System
• Food Management System

76
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77
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78
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79
Whirlpool Strategic Design

• Mission Statement
• Vision
• Value Creating Objectives
• Shared Values
• Worldwide Excellence System

80
Whirlpool CorporationHow We Must Work, Think,
Plan and Manage to Reach Our Objectives
Whirlpool People Leadership Quality of Processes
and Products Fact-Based Management Strategic
Planning Measurement and Results Customer
Satisfaction
Figure 6-4
81
Four Whirlpool Options
1. Stick to its large appliance knitting within
the North American market and fight for
increased market share with the hope that
economic factors would improve its market
conditions. 2. Diversify within the North
American market. 3. Pursue a global strategy as a
conservative player in multiple global
markets. 4. Pursue an aggressive global strategy
with the objective of leading the redefining
of the world- wide large appliance industry.
82
Whirlpool Mission Statement
To shape and lead the major home appliance
industry globally, becoming one of the worlds
great companies while creating value for
shareholders, employees, customers, suppliers,
government leaders and communities.
83
Whirlpool Vision
Whirlpool, in its chosen lines of business, will
grow with new opportunities and be the leader in
an ever-changing global market. We will be
driven by our commitment to continuous quality
improvement and to exceeding all of our
customers expectations. We will gain
competitive advantage through this, and by
building on our existing strengths and developing
new competencies. We will be market driven,
efficient and profitable. Our success will make
Whirlpool a company that worldwide customers,
employees and other stakeholders can depend on.
84
Pyramid of Excellence
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
85
Whirlpool Corporation
The market of tomorrow will be huge, filled with
tough savvy customers with a wide range of
preferences and choices. We must fulfill their
needs and meet their expectations in quality and
service. We must surprise them.
David R. Whitwam Whirlpool CEO
86
Platform for Global Success
1. Product Technology. 2. Procurement. 3.
Information Systems
87
Worldwide Major Appliance Industry
Japan Matshushita Electric
Hitachi Korea Samsung
United States Whirlpool General Electric
Maytag Sweden Electrolux
Figure 6-5
88
Morita and Sony
Sony was started in 1946 when Morita, the oldest
son of a rice wine brewer, joined former Japanese
navy colleague Masaru Ibuka, a fellow engineer,
to start a business repairing radios on borrowed
500. A significant number of firsts -
Japans first transistors in 1954. -
Japans first transistor radio in 1955. -
First Japanese company to be listed on the NYSE.
- First Japanese company to build a U.S.
factory.
89
Sony
Morita told engineers to make Walkmans despite
the lack of market research. We dont believe
in market research for a new product unknown to
the public. So we never do any. Preferred
Approach innovation in design, manufacturing and
marketing.
90
Lee Kuan Yew and Singapore Inc.
Although no nation's history can ever be reduced
to the story of one man, Lee Kuan Yew had such a
paramount role in making modem Singapore that an
understanding of that country, its society and
its business environment cannot be complete
without an attempt at understanding Lee himself.
Lee took the opportunity to assure Malays that
they need not fear Hong Kong immigrants taking
their jobs because the immigrants will all be
high income earners.
91
Business Vision
Increasingly, companies are using vision
statements to explain who they are, where they
are going and why customers and employees should
follow them there.
92
A Good Vision Statement

• Provides a clear picture of what the company
  wants to be in the future.
• Excites and motivates people and gains consensus
  and commitment.
• Focuses on operations.
• Is measurable at least in general terms.
• Establishes a standard of excellence.
• Changes the basis for competition.

93
Good Vision Statement?
We want to sell a variety of products on a
daily basis to every living person on the earth.
PepsiCo.
94
Good Vision Statement?
To be the world leader in transportation
products and services.
General Motors Corp.
95
A Good Vision Statement?
To continue to be the worlds best way to pay and
be paid for consumers and businesses.
Visa International
96
Good Vision Statement?
Absolutely, positively overnight!
Federal Express
97
Good Vision Statement?
To provide the best service and lowest fares to
the short haul, frequent-flying, point-to-point,
non-interlining traveler.
Southwest Airlines
98
When you have a vision and someone comes to you
with some convoluted idea, you should be able to
hold it up to the vision and ask Does it fit?
Does it fly? If not, dont bother with it.
The ingredient that catapulted Southwest to the
top of the industry is simple, elegant and well
publicized.
Discipline, focus and execution.
Throughout its existence, Southwest has
consistently adhered to a clearly defined purpose
and a well thought out strategy for accomplishing
it.
99
Good Vision Statement?
Do it, try it, fix it!
Wal-Mart Stores
100
Wal-Mart Vision
I concentrated all along on building the finest
retailing company that we possibly could.
Period.
Creating a huge personal fortune was never a
goal of mine.
Sam Walton
101
Wal-Mart
If you are not serving the customer or supporting
the folks that do, then we dont need you.
102
AMR Corporate Vision

• We will be the global leader in air
  transportation and
• related information services.
• That leadership will be attained by
• Setting the industry standard for safety and
  security.
• Providing world class service.
• Creating an open and participative work
  environment which seeks positive change, rewards
  innovation, and provides growth, security and
  opportunity to all employees.
• Producing consistently superior financial returns
  for shareholders.

103
Built to Last Companies
1812 Citicorp 1837 Procter and Gamble 1847
Phillip Morris 1850 American Express 1886 Johnson
Johnson 1891 Merck 1892 General Electric 1901
Nordstrom 1903 3Com
1911 IBM 1915 Boeing 1923 Walt Disney 1927
Marriott 1928 Motorola 1938 Hewlett-Packard 1945
Sony 1945 Wal-Mart
104
Built to Last Conclusions
1. A visionary company does not by definition
start with a great idea.
2. A charismatic leader is not required for a
visionary company.
3. There are no standard core values to be a
visionary company.
4. A visionary company is not built on frequent
change but a focus over time on its core
ideology.
105
Built to Last Conclusions
5. Visionary companies may appear conservative to
outsiders but they are not afraid to make bold
commitments and/or establish ambitious goals.
6. Only those people who fit well with the core
ideology and the demanding standards of a
visionary company will find it a great place to
work.
7. Visionary companies make some of their best
moves by experimentation, trail and error,
opportunism and accidentally.
8. Great visionary companies seldom go outside to
hire a new CEO.
106
Built to Last Conclusions
9. Visionary companies focus primarily on beating
themselves.
10. Visionary companies believe they can
accomplish major objectives simultaneously
without making major negative trade-offs.
11. Visionary companies attained their successful
status not so much because they made visionary
pronouncements (although they frequently did) but
by pursuing a never-ending process of emphasizing
the above factors.
107
A Logical Vision Process

• Define the Business Environment.
• Build a Company Vision.
• Turn the Vision into a Plan.
• Drive Action with the Plan.

108
Invest
Vision
Save Money
Asset
Applications
Networks
Expense
Strategic
Tools
Tactical
109
By instilling
You create
Which results in
Improved Performance
Leadership
Vision
Market Impact
A Great Company
Strategy
Excellent Reputation
Tactical Excellence
Sustained Success
Innovation
110
A Vision that Works

• It gains commitment and energizes employees.
• It creates meaning in employees lives.
• It helps to establish a standard of excellence.
• It bridges the past and the future.
• It assures future business success.