What

1
Whats Happening?!
Venture funding in Silicon Valley 22 in the 4th
quarter--1.7 billion.
Venture capitalists are moving from trying to
save older, struggling companies to investing in
youngest start-upsthe ones most likely to hire
new people.
These are the kinds of jobs that wont be
leaving the country.
2
Andy Groves Five Key Principles

• Enjoy your work.
• It is impossible to like all of it.
• Most people will like their work if they feel
  that what they do makes a difference.

• 2. Be totally dedicated to the end result.
• Not how you got to it.
• Or whose idea it was.
• Or whether you look good or not.

3
Andy Groves Five Key Principles
3. Respect the work of all those who respect
their own work.

• 4. Be straight with everyone.

5. Always, when stumped, stop and think your way
through to your own answers.
4
Course Schedule
Section I and II of ATP is due a week from this
Thursday.
Midterm exam pushed back to Thursday, Feb. 12.
Midterm exam clinic on Thursday, Feb. 5 at 6 to
7 PM.
5
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
6
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
7
Chapter 5 Summary

• Information Systems Can Redefine Competitive
  Boundaries

8
Chapter Topics

• A. Interorganizational Systems
• B. Strategic Business Alliances
• C. Electronic Data Interchange (EDI)
• (extranets versus EDI)

With an added dose of globalization.
9
Interorganizational Systems

• Interorganizational Systems are defined as
  automated
• information systems shared by two or more
  companies.
• Enhance business relationships.
• Establish strategic alliances.
• Gain efficiencies.
• Gain effectiveness.
• Lower cost of doing business.

10
Interorganizational System Goals

• Efficiency
• Effectiveness
• Competitive Advantage

11
Interorganizational Systems

• Is this just another name for outsourcing?
• Is there any difference between sending work from
  Santa Cruz to San Jose and sending it from Santa
  Cruz to Bombay?

The trend is not new and may be overstated.
According to Gartner, 10 per cent of info tech
jobs with US based technology companies will be
based in countries in emerging markets by the end
of 2004.
It is unlikely that the federal government will
do anything to limit or ban outsourcing.
12
Strategic Alliances

• How (why) do they work?
• Companies bring strengths to the alliance table.
• Alliances create long term advantages.
• Alliances drive business growth.
• Alliances often represent a difficult transition.

13
Strategic Alliances

• Why establish a strategic alliance?
• To build a combined capability that makes it a
  stronger competitor.
• Extended enterprise against the competitors
  extended enterprise.
• Difficult, costly and risky to try to deal with
  the challenges of a global business.

14
EDI

• Electronic Data Interchange (EDI) (Predecessor to
  
• extranets)
• Exchange of routine business transactions in a
• structured computer-processed format.
• Traditional applications included purchasing,
  pricing, scheduling, payments and financial
  reporting.

15
Why stay with an EDI system?

1. It is established and proven.
2. The network costs are not large enough to justify
   switching to an extranet approach.
3. There are other priorities within the
   organization.

16
Global Motivation
Offense/DefenseOpportunities/Threats
Global economies of scale to recoup RD and
capital costs. Build and strengthen global
brandseconomies of scope.
If your competitors have established a global
position do you really have a choice as to
whether you should also compete on a global basis?
Acknowledge the better standard of living and
increased mobility of a greater number of people
in countries around the world.
17
Possible Exam Questions

1. Explain the term extended enterprise and the
   possible benefits for a company in establishing a
   competitive position.
2. Explain and contrast the current extranet
   emphasis with the more traditional EDI approach.

18
Chapter 6 Introduction

• Business Vision

By Steven Levchenko
19
Section II

• The Company Environment

• Business Environment
• Specific Industry
• Enterprise Environment
• The Company Itself
• IT Environment
• Used for competitive advantage

Business Success
20
Business Vision
To carry out its work, the organization
needs from its leader a clear statement of its
vision and strategy. Max DePree,
Herman Miller, Inc.
21
Business Vision

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

Two company examples are provided USAA
Whirlpool
The major point to remember is that vision
triggers the entire business and information
technology management process.
22
Business Vision Process
Sensing Opportunity
Vision
Leadership
Strategy
Tactics Business Plan
Agreement/Commitment
Implementation
Feedback
23
Leadership

• A major premise of this course is that successful
  
• companies are the result of good leadership in
  two forms

• Companies need to be run well from an
• operational standpoint.

• They also need to be well directed and this is
• accomplished through an effective vision that is
  
• communicated throughout the organization.

24
Chapter 6

• Business Vision

25
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.
26
The essence of competitiveness is vision,
leadership and a hunger to succeed.
P. R. Vagelos Chairman and CEO Merck
27
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.

28
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 body, 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.
29
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.
30
Microsoft Vision
Empower people through great software, anyplace,
any time and on any device.
31
Values Beliefs Principles
C u l t u r e
Mission Goals
Vision
Strategies
Tactics
Objectives and Measurements
Authority and Responsibility
Business Plan
32
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.

33
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.
Gerstner proceeded to focus on cost-cutting and
other management issues and proved the
vision- hungry pundits wrong.

34
Culture Change
Changing IBM's culture was Gerstner's most
challenging long-term task. Early in his tenure,
he told employees, We've lost 16 billion in
the last three years Fortune magazine says
we're a dinosaur. Don't you think we ought to
change? It's pretty obvious what we're doing
isn't working."
35
Gerstner Approach
Gerstner constantly asked managers, "What are
your customers telling you? Do you understand
your market? Have you segmented your
market?" Managing change in the fast-paced
technology business is extremely challenging and
difficult to master.
36
Gerstner Approach
He managed IBM like the customer that he used to
be.
He had major discipline in how he used his time.
He shifted IBMs primary focus from hardware to
services and from mainframes to the Internet and
software.
37
Executive Vision
If a company has restructured where do they turn
for business performance and financial
improvement?
Job experience can easily count more than
intuition.
A broad grounding in a particular industry is a
prerequisite to successful direction setting.
Visionaries can draw a conceptual roadmap to some
imagined future.
38
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
39
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
40
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.
41
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
42
Implementation (Action)
The Vision to Action Process
Agreement Commitment
Tactics and Business Plan
Strategy
Feedback
Vision
Sensing Opportunity
Figure 6-1
43
Vision Examples

• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.
• Gil Amelio at National Semiconductor

44
If Starting Today
Robert McDermott, USAA Jack Welch, General
Electric David Whitwam, Whirlpool Jeff
Bezos, Amazon.com Peter Lewis, Progressive Corp.
Charles Schwab, Schwab Co.
Michael Dell, Dell Computer Sam Walton,
Wal-Mart Stores Fred Smith, Federal Express
Meg Whitman, eBay Louis Gerstner, IBM Akio
Morita, Sony Lee Kuan Yew, Singapore, Inc.
45
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.

46
Information systems are strategic weapons, not
cost centers. Robert F. McDermott,
Former USAA CEO
47
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.

48
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
49
USAAs ultimate goal is to manage its customer
relationships and not its individual products.
How does this relate to information systems?
50
USAA Videotape
51
USAA Products and Services
So integrated that members lose something if they
go elsewhere.
52
USAA Business and IS Goals
1. Customer Convenient 2. Operator Efficient 3.
Cost Effective
53
Information Systems Strategies

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

54
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
55
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
56
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.
57
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.

58
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.

59
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
60
Stock Performance
61
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.
62
Whirlpool Corporation
Principal Products Automatic Dryers Automatic
Washers Dehumidifiers Dishwashers Freezers Microwa
ve Ovens Ranges Refrigerators Trash
Compactors Room Air Conditioners
63
Who Buys Large Appliances

1. Contractors for new homes.
2. Home owners for replacements.
3. Appliance service businesses.
4. Businesses and public sector entities.
5. First time appliance buyers.

64
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
65
Differentiation Strategy!?

• Clothes Management System
• Food Management System

66
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67
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68
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69
Whirlpool Strategic Design

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

70
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
71
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.
72
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.
73
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.
74
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
75
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
76
Platform for Global Success
1. Product Technology. 2. Procurement. 3.
Information Systems
77
GE Versus Whirlpool
Has tried for years to dislodge Whirlpool as No.
1 in the US. GE spent 100 million to develop a
new washer. Plastic washer basket versus
traditional porcelain. Lost a major battle to win
Sears washer business. Gained two percentage
points in market share in 2000. (2 is 400
million in a 20 billion market.) Offered
significant purchase rebates. Operating profits
were 12 (low for GE). President of GE Being in
this business is painful.
78
Worldwide Major Appliance Industry
Japan Matshushita Electric
Hitachi Korea Samsung
United States Whirlpool General Electric
Maytag Sweden Electrolux
Figure 6-5
79
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.
80
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.
81
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.
82
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.

83
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.
84
Good Vision Statement?
We want to sell a variety of products on a
daily basis to every living person on the earth.
PepsiCo.
85
Good Vision Statement?
To be the world leader in transportation
products and services.
General Motors Corp.
86
A Good Vision Statement?
To continue to be the worlds best way to pay and
be paid for consumers and businesses.
Visa International
87
Good Vision Statement?
Absolutely, positively overnight!
Federal Express
88
Good Vision Statement?
To make the maximum computing power available to
a broad user audience through open technologies.

Sun Microsystems
89
Sun Vision Statement
To be an industry leader, you need vision. But
thats just the beginning. You also need the
people, products, and relationships to take your
vision to market and turn it into a compelling
reality.
90
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
91
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.
92
Good Vision Statement?
Do it, try it, fix it!
Wal-Mart Stores
93
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
94
Wal-Mart Vision
Sam Walton built incrementally, step by step from
a single store until a rural discount store model
popped out as a natural evolutionary step.
Jim Collins states that it took almost twenty
years for them to arrive at this conclusion.
95
Wal-Mart
If you are not serving the customer or supporting
the folks that do, then we dont need you.
96
Wal-Mart Core Values

1. We exist to provide value to our customersto
   make their lives better via lower prices and
   greater selection all else is secondary.
2. Swim upstream, buck conventional wisdom.
3. Be in partnership with employees.
4. Work with passion, commitment and enthusiasm.
5. Run lean.
6. Pursue ever-higher goals.

97
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.

98
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.
99
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.
100
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.
101
Founding Dates
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
102
Visionary Companies

• Display a remarkable resiliency, an ability to
  bounce back from adversity.

• They attain excellent long term performance.

• These companies have frequently woven into the
  very fabric of society.

103
Soft Visionaries?
Visionary does not mean soft and undisciplined.
Because the visionary companies have such
clarity about who they are, what they are about
and what they are trying to achieve, they tend to
not have much room for people unwilling or
unsuited to their demanding standards.
104
Business Vision
One of the myths of management is that an
appropriate vision and good strategic planning
will ensure an institutions future. This is
not enough!
105
A Logical Vision Process

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

106
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.

107
Invest
Vision
Save Money
Asset
Applications
Networks
Expense
Strategic
Tools
Tactical
108
By instilling
You create
Which results in
Improved Performance
Leadership
Vision
Market Impact
A Great Company
Strategy
Excellent Reputation
Tactical Excellence
Sustained Success
Innovation
109
Vision
Which attitude would you support on this subject?
1. There is little hard evidence that companies
with vision statements perform better than
those without. 2. At the current rate of
change in the business environment,
companies need a clear, consistent sense of
where they are going.