3Learning ObjectivesDiscuss the role of planning in the business use of information technology, using the scenario approach and planning for competitive advantage as examplesDiscuss the role of planning and business models in the development of business/IT strategies, architectures, and applicationsIdentify several change management solutions for end user resistance to the implementation of new IT-based business strategies and applications
4Planning Fundamentals Information technology has created a seismic shift in the way companies do businessJust knowing the importance and structure of e-business is not enoughYou must create and implement an action plan that allows you to make the transition from an old business design to a new e-business design
5Case 1: The Portfolio Approach to IT 7-Eleven blends its IT investments with a range of assertive IT practices and capabilitiesCounselor visits to stores twice a weekDelivers of stock three times a dayA transparent information infrastructure that links 70,000 computers at stores, headquarters, and supplier sites
6Case 1: The Portfolio Approach to IT MIT identified four broad classifications of IT investments that can be managed as a portfolio to minimize business risk and optimize returnTransactional: used to cut costs or increase throughput for the same costInformational: provide information for accounting, reporting, compliance, communication, or analysis
7Case 1: The Portfolio Approach to IT Strategic: used to gain competitive advantage by supporting entry into new markets or by helping to develop new products, services, or business productsInfrastructure: typically aimed at providing a flexible base for future business initiatives or reducing long-term IT costs via consolidation
8Case Study QuestionsWhat is the portfolio management approach to IT planning?Use the four classifications of IT investments and examples of companies in this case to illustrate your answerWhat are the keys to 7-Eleven Japan’s great success compared to other retailers in Japan?How does IT support such success?How could 7-Eleven Japan do even better?What role would IT play?
10Planning Strategic Planning Tactical Planning Operational Planning Deals with the development of an organization’s mission, goals, strategies, and policiesBegins with strategic visioning questionsTactical PlanningThe setting of objectives and the development of procedures, rules, schedules, and budgetsOperational PlanningDone on a short-term basis to implement and control day-to-day operations
12The Scenario ApproachGaining in popularity as a less formal, but more realistic, strategic planning methodologyTeams of managers and planners participate in microworld or virtual world exercisesBusiness scenarios are created and evaluatedAlternative scenarios are then created
14Planning for Competitive Advantage Strategic business/IT planningInvolves evaluating the potential benefits and risks of using IT-based strategies and technologies for competitive advantageThe following models can help generate ideas for the strategic use of IT to support initiativesCompetitive forcesCompetitive strategiesValue chain
16SWOT Analysis SWOT stands for Strengths: a company’s core competencies and resourcesWeaknesses: areas of substandard business performance compared to othersOpportunities: potential for new business markets or innovative breakthroughs that might expand current marketsThreats: anything that has the potential for business and market losses
17Business Models and Planning Business model answers vital questions about the fundamental components of a businessWho are our customers?What do our customers value?How much will it cost to deliver that value?How do we make money in this business?
18Questions for all Business Models Customer valueAre we offering something distinctive or at a lower cost than our competitors?ScopeTo which customers is this value being offered?What range of products/services offered embody this value?PricingHow do we price the value?
19Questions for all Business Models Revenue sourceWhere do the dollars come from? Who pays for what value and when? What are the margins in each market, and what drives them?What drives value in each source?Connected activitiesWhat do we have to do to offer this value and when?How connected are these activities?
20Questions for all Business Models ImplementationWhat structure, systems, people, and environment do we need to carry out these activities?What is the fit between them?SustainabilityWhat is it about the firm that makes it difficult for other to imitate it?How do we keep making money?How do we sustain our competitive advantage?
21Questions for all Business Models CapabilitiesWhat are our capabilities and capabilities gaps?How do we fill these gaps?Is there something distinctive about these capabilities that lets us offer the value better than other firms?Is this capability hard to imitate?What are the sources of these capabilities?
22Questions Specific to E-Business Models Customer ValueWhat is it about Internet technologies that allows us to offer customers something distinctive?Can Internet technologies help us to solve a new set of problems for customers?ScopeWhat is the scope of customers that Internet technologies enable us to reach?Does the Internet alter the product or service mix that embodies the firm’s products?
23Questions Specific to E-Business Models PricingHow does the Internet make pricing different?Revenue sourceAre revenue sources different with the Internet?What is new?Connected activitiesHow many new activities must be performed as a result of the Internet?How much better can Internet technologies help us perform existing activities?
24Questions Specific to E-Business Models ImplementationHow do Internet technologies affect the strategy, structure, systems, people, and environment of the firm?CapabilitiesWhat new capabilities do we need?What is the impact of Internet technologies on existing capabilities?SustainabilityDo Internet technologies make sustainability easier or more difficult?How can the firm take advantage of it?
25Business Models as Planning Tools A business model forces rigorously and systematic thinking about the value and viability of business initiativesThe strategic planning process is then used to develop unique business strategies that capitalize on a business modelThe goal is to gain a competitive advantage in an industry or marketplace
27The Business/IT Planning Process The business/IT planning process has three major componentsStrategic developmentResource managementTechnology architecture
28Information Technology Architecture The IT architecture is a conceptual design that includes these major componentsTechnology platformData resourcesApplication architectureIT organization
29Balanced ScorecardThe balanced scorecard measures a company’s activities in terms of vision and strategiesThe system has four processesTranslating vision into operational goalsCommunicating the vision and linking it to individual performanceBusiness planningFeedback/learning and strategy adjustment
30Balanced Scorecard The business perspectives a scorecard measures Financial: reflects financial performance, such as cash flow or ROICustomer: measures having a direct impact on customers, such as time to process phone callsBusiness process: reflects the performance of key business processes, such as time spent prospecting or process costsLearning/growth: the company’s learning curve, such as how many hours are spent training staff
31Identifying Business/IT Strategies The most valuable Internet applications allow companies toTranscend communication barriersEstablish connections that enhance productivityStimulate innovative developmentImprove customer relations
33Strategic Matrix Cost and Efficiency Improvements Use the Internet as a fast, low-cost way to communicate and interact with othersUse of , chat systems, discussion groups, and company websitesPerformance Improvement in EffectivenessMajor improvements in business effectiveness recommendedIncrease use of Internet-based technologies, such as intranets and extranets
34Strategic Strategies Global Market Penetration Capitalize on a high degree of customer and competitor connectivity and use of ITUse e-commerce websites with value-added information services and extensive online customer supportProduct and Service TransformationDevelop and deploy new Internet-based products and services that strategically reposition it in the marketplace
35E-Business Strategy Examples Market Creator: be among the first to market and remain ahead of the competition by continuously innovatingChannel Reconfiguration: use the Internet as a new channel to directly access customers, make sales, and fulfill ordersTransaction Intermediary: Use the Internet to process purchases
36E-Business Strategy Examples Infomediary: use the Internet to reduce the search cost; offer a unified process for collecting the information needed to make a large purchaseSelf-Service Innovator: provide a comprehensive suite of services that the customer’s employees can use directlySupply Chain Innovator: use the Internet to streamline supply chain interactionsChannel Mastery: use the Internet as a sales and service channel
40Implementation Many companies plan changes very well Few manage to convert a plan into actionThis is true even if senior management consistently identifies e-business as an area of great opportunity
41Case 2: Infosys Implementation Challenges Company adage is “learn once, use everywhere”Developed a companywide knowledge management programOffered knowledge currency units (KCUs) for contributions to jump-start usageIssues encounteredInformation overloadSlow searches for reusable informationShortage of volunteer reviewersContributions of questionable qualityInformation hoarding
42Case 2: Infosys Implementation Challenges Revamped the SystemFormulated a composite KCU score based on information usefulness and benefitInformation rated by actual usersDemanded justification for high ratingsReduced the number of KCUs awarded for reviewing contributionsRaised the bar for cashing in KCU incentive points for monetary rewards
43Case Study QuestionsWhy do you think the knowledge management system at Infosys faced such serious implementation challenges?What steps did the KM group at Infosys take to improve participation in the KM system?Why were some of these initiatives counterproductive?The KM group responded well with corrective initiatives. Do you think these will succeed?
44Case Study QuestionsWhat change management initiatives should the KM group have initiated in Infosys before attempting to develop and implement knowledge management at the company?Defend your proposals, paying particular attention to the final quote in the case by a long-time KM manager at Infosys
45Implementing Information Technology Many businesses have undergone multiple major reorganization since the early 1980sBusiness process reengineeringInstallation and upgrades of an ERP systemUpgrading legacy systems to be Y2K compliantCreating shared service centersJust-in-time manufacturingSales force automationContract manufacturingThe introduction of euro currencyE-business is the latest organizational change
47Intranet Enterprise Portal Challenges Security, security, securityDefining the scope and purpose of the portalFinding the time and the moneyEnsuring consistent data qualityGetting employees to use itOrganizing the dataFinding technical expertiseIntegrating the piecesMaking it easy to useProviding all users with access
48Enterprise Resource Planning Challenges Getting end user buy-inScheduling/planningIntegrating legacy systems/dataGetting management buy-inMultiple/international sites and partnersChanging culture and mind-setsIT trainingGetting, keeping IT staffMoving to a new platformPerformance/system upgrades
49End User Resistance and Involvement Any way of doing things generates some resistance from the people affectedCRM projects have a history of failureUp to 75 percent of CRM projects fail to meet their objectivesThis is often due to sales force automation problems and unaddressed cultural issuesSales staffs are often resistant to, or fearful of, using CRM systems
50Keys to Solving End User Resistance Keys to solving end user resistance problemsEducation and trainingEnd-user involvement in organizational changes and system developmentRequiring involvement and commitment of top management and all stakeholdersSystems that inconvenience or frustrate users cannot be effective, no matter how technically elegant or efficient
54Change ManagementImplementing a new e-business application may involveDeveloping an action planAssigning managers as change sponsorsDeveloping employee change teamsEncouraging open communications and feedback about organizational changes
55Change Management Key tactics recommended by change experts Involve as many people as possible in e-business planning and application developmentMake constant change an expected part of the cultureTell everyone as much as possible about everything, as often as possible, in personMake liberal use of financial incentives and recognitionWork within the company culture, not around it
58Case 3: Strategies of Second Movers Gain an edge by observing what the first mover has doneBe better, faster, cheaper, easierTrip up incumbents with tactics from other fieldsSwipe business models and start your own raceFollow the biggest leader you can findAim for the leader’s Achilles’ heel
59Case Study QuestionsIs the second-mover advantage always a good planning strategy?What can a front-runner business do to foil the assaults of second movers?Do second movers always have the advantage in Web-based business success?
60Case 4: Planning for Innovation Federal Express spends $1 billion/year on ITPrimary focus is on revenue-generating, customer-satisfaction-generating, and strategic-advantage technologyOperational technology receives slightly less attentionCompany philosophiesIt’s easier to copy than to innovateMove, communicate, and shoot
61Case Study QuestionsHow do the IT investment strategies and focus of FedEx and its main competitor UPS differ?Which company has the better strategy?Is FedEx’s “move, communicate, shoot” IT strategy a good one for its competitive battle with UPS?Is it a good model of competitive IT strategy for other types of companies?
62Case Study QuestionsFedEx CIO Carter says his company is in the business of engineering time.Is this a good business vision for FedEx?How vital is IT to this definition of FedEx’s business?