1. Management Process Is Key
Management Process: How It Impacts the Organization
Best Practice of IT Strategy Driven by Management Process
- Pepsi-Cola Case Example
3. Where to Position the Analytical System
4. The Critical Success Factors Approach
- GE Power Systems Case Example
5. The Balanced Scorecard
6. Market-Driven Performance Measurement
- Dannon Yogurt Case Example
7. Planning vs. Control Systems
8. Expert Systems: Potential for Automating Processes
- OceanSpray Case Example: Extracting News from Data
9. Automated Decision Technologies: The New Frontier
- DeepGreen Financial Case Example
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

2. Linking Strategy to Operations
- A Closed-Loop Management System
Stage 1
Develop the Strategy
Stage 2
Translate the Strategy
Into Specific Objectives
And Initiatives of a
Strategic Plan
Stage 6
Reassess the Strategy
And Update it
Stage 3
Plan Operations
Map out the Operational
Plans and resources to
achieve objectives
Stage 5
Monitor & Learn
Stage 4
Execute the Strategy & Operational Plans
Dr. Lakshmi Mohan
Source: R.S. Kaplan & D.P. Norton, “Mastering the Management System,” HBR, Jan. 2008, p.65
Dr. Lakshmi Mohan

3. Management Process - The Glue that Holds the Organization Together
Organization Structure and the Corporate Culture
EXTERNAL ENVIRONMENT: Social, Economic, Political
EXTERNAL ENVIRONMENT: Technological
The Organization’s Strategy
MANAGEMENT PROCESSES: Planning, Control, Rewards
Technology
Individuals and
Roles
Competitors
Customers
Adapted from M.S. Scott Morton & J.F. Rockart, “Implications of Changes in IT for Corporate Strategy,” Interfaces, Jan-Feb, 1984
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

4. Management Processes That Merit Examination
Planning and Budgeting
Performance Measurement and Reporting
Resource Allocation
Human Resource Management
LESSON: Investments in providing good quality information are a waste if managers do not use the system. Hence, improve the management process first and then develop the information system to support the improved management process.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

5. PEPSI-COLA CASE EXAMPLE
PEPSI-COLA COMPANY
Sell "Concentrate"
PEPSI BOTTLERS
Convert "Concentrate" into Products
Bottles & Cans
Fountain Syrup
- Restaurants
Vending
- Stores
CONSUMERS
The Bottler has to be well-managed for the Pepsi-Cola Company to prosper.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

6. Focus on the Management Process
Identify the Revenue Drivers and Cost Drivers of the Bottler's operations.
Develop the Management Process or "how-to"
procedures for managing these drivers.
An Information System to implement
the "how-to" procedures.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

7. PEPSI - COLA'S Thinking in 1982
All Bottlers face essentially the same problems with regard to improving their operating efficiency and profitability.
Why should each Bottler reinvent the wheel?
Pepsi-Cola Company will make the investment in developing an information system that can be used by all Bottlers.
The PC will enable a "standard" software package to be developed for the Bottler Information System.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

8. A Comprehensive Information System to Support the Management Process
Developed over a three-year period:
Phase I: Sales Analysis &
Tank/Cylinder Monitoring
Phase II: Equipment Tracking &
Service Analysis
Phase III: Financial Analysis
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

9. Information Provided by the System
- Some Examples
How are My Route Drivers Performing?
What is the Average Drop Size for Each Route?
Are the Trucks being Overloaded?
What is the Sales Trend in Different Channels for Pepsi-Free?
Where are My Tanks?
How Many Pieces of Equipment are on Loan?
What is the Productivity of My Mechanics?
Which Makes of Equipment are Less Dependable?
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

10. Where to Position the Analytical System ?
Initial Target of Most BI Systems:
- Corporate Financial Data
Why?
- Area of great interest for top management
- Data readily available
- Easy to implement
Is a Corporate Financial BI Really “Useful” ?
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

11. A Corporate Financial BI System Is “Useful” IF...
It has Micro-Level Data
e.g. Expenditures at the Detail Level
Data on Individual Debtors by Ageing Period
BI System can then Trace Problems to the Root Causes
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

12. The CSF Approach What Is It? Why?
A method to determine the information requirements to improve management effectiveness.
Why?
Existing MIS systems are “data-rich but information-poor”
- too much financial data
- unfiltered data
- irrelevant operational data
- no external environment data
We need information about what really counts; just because data is available doesn’t mean it’s important.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

13. Critical Success Factors are ...
The key areas where “things must go right” for the business to flourish
They should receive constant and careful attention
from management - Determine the Key Indicators
Measure the performance of each indicator -
Determine the data needed for each indicator
IDENTIFY MUST - DOs
 FOCUS BI ON MUST - KNOWs
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

14. The Critical Success Factors Approach
Identify the specific factors
most responsible for the
organization to achieve its goals
Determine the KPIs for
monitoring each CSF
Define the data requirements
for measuring each KPI
Develop prototype system. Modify
prototype based on user feedback
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

15. Goals vs. CSFs For For-Profits
Earnings per share
Return on investment
Market share
New product success
Automotive Industry
Styling
Quality dealer system
Cost control
Meeting energy standards
Supermarket Industry
Product mix
Inventory
Sales promotion
Price
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

16. Measures for Tracking CSFs -- An Example
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

17. Merits of the CSF Approach
1. Focuses on what management absolutely needs to do and know -- not those which would be merely nice to do and know
2. Sets priorities in the Information Systems Plan
3. Limits data collection to what is necessary
4. Avoids the trap of building systems on data which is readily available or easy to collect
5. Forces consideration of external and soft data
6. Highlights the need for change in information systems in response to environmental and business changes
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

18. GE Power Systems: Focus BI on “MUST - DOs”
Changing Business Focus:
from new machine to replacement parts market
from U.S. to international
more price sensitive
Increase Productivity
Reduce Costs
Improve "Customer Service"
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

19. What Are the “MUST - KNOWs” ?
Quote Performance Shipment Performance
New Data on "DATES"
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

20. Data On “Dates” Needed For BI
· "QUOTE CYCLE" FROM:
- Date of request for quote
- Date of quote release
· "REQUESTED CYCLE" FROM:
- Date of order
- Customer "want" date
· "SHIP CYCLE" FROM:
- Date of shipment
Tracking Cycle Times: Important For Changing Organization Culture From Technology-driven to Market-driven
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

21. Traditional Performance Measurement Systems Are Inadequate...
Each function has its own set of “results measures”. For example:
Marketing - Market Share
Operations - Inventory
Finance - Costs
These narrow functional measures could
lead to overall system Suboptimization.
The few cross-functional results measures are financial:
Revenues, Gross Margins, Operating Income,
Return on Investment, etc.
Report on what happened last period without indicating
how managers can improve performance on the next
What is Needed: Process Measures
To monitor activities throughout the organization
that produce a given result.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

22. The Balanced Scorecard
Translates a company’s strategic objectives into a coherent set of performance measures with four different perspectives:
Customer
Financial
Internal Business Processes
Innovation and Learning
A limited number of critical indicators should be selected within each perspective - about 15 to 20.
Real benefit: Scorecard is the core of the management system - the way the business is run.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

23. Rockwater’s Balanced Scorecard
Financial Perspective
Customer Perspective
Internal Business Perspective
Innovation & Learning Perspective
Return-on-Capital Employed
Cash Flow
Project Profitability
Profit Forecast Reliability
Sales Backlog
Pricing Index, Tier II Customers
Customer Ranking Survey
Customer Satisfaction Index
Market Share
Business Segment, Tier I Customers,
Key Accounts
Hours with Customers on New Work
Tender Success Rate
Rework
Safety Incident Index
Project Performance Index
Project Closeout Cycle
% Revenue from New Services
Rate of Improvement Index
Staff Attitude Survey
# of Employee Suggestions
Revenue per Employee
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

24. Market-based Performance Measures...
MUST be linked to Reward Systems
Measurement and reward systems are critical in developing a market-oriented business. Just as managers will emphasize those things that top management’s statements of beliefs and values focus their attention on, they will also do those things for which they are evaluated and rewarded
Source : F. Webster, “Rediscovering the Marketing Concept,”
Marketing Science Institute Working Paper, 1988.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

25. The Dannon Yogurt Case Example
Critical Success Factor: Customer Service
Key Performance Indicators :
For Each Customer
Fill Ratio of Each SKU = Shipments  Orders
Freshness of Product of Each SKU = Shelf-Life of Shipments
New Data Requirements:
Fill Ratio of the SKU: Orders for that SKU from Customer
Freshness of Product of SKU: Code Dates on Containers of SKU Shipped to Customer
(Available Shelf-Life = Code Date minus Ship Date)
Result : The legacy Invoicing System, which only had data on
Shipments, had to be replaced with a new system that
captured the additional data needed for management control.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

26. A Market-Driven Performance Measurement System
Customer Service became the metric in Dannon for measuring performance of: Marketing Sales Distribution AND Production
Uniform Performance Measurement is critical for integrating the important functional areas in the business process.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

27. Control the Implementation, between Plan and Actual
The Management Cycle
Establish
Objectives
Formulate
Plan
Implement
Plan
Revise
Objectives
Replan
Monitor
Performance
Control the Implementation,
React to Deviations
between Plan and Actual
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

28. Management Process: Planning and Control
Deciding “Today” what to do “Tomorrow”
The Planning Horizon: Strategic Planning may be Years Budgeting may be a Year Production may be Weeks
Implement
Get Organizational Buy-in
Restructure Organization if necessary
Monitor
Measuring Actual Performance is Critical for Control
Control
How has Actual Performance deviated from Plan?
What corrective action must we take?
Deviations may also represent an opportunity
What is the typical planning horizon in today’s environment?
What does control being under monitoring imply? Control depends on monitoring.
Budgeted versus actual. Deviations may present an opportunity. For example, a long standing struggle with a competitor you may reduce prices, more advertising to gain market share or increased outreach for a lobbying effort to get legislation changed.
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

29. A BI TO SUPPORT PLANNING IS NOT EASY TO DESIGN
(1) Large number of available alternatives
 how to determine the "best" plan
(2) Uncertainty about the outcomes
 how to evaluate the consequences
(3) Multiple criteria for measuring outcomes
 how to combine "apples" and "oranges"
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

30. "SATISFICING" vs. "OPTIMIZING" IN DECISION-MAKING
Choose a solution that is good enough using
manager's rules of thumb or heuristics.
Benefits: Saves time and cost
Easy to implement
versus
Search for the best solution using an optimizing model
Problems: Model may not fit the problem
More data needed
More time and cost
Higher intellectual cost
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

31. MONITORING PERFORMANCE
(1) WHAT ?
 What "readings" of actual performance should be
taken?
(2) HOW ?
 Where should the "meters" for taking the readings be placed?
(3) HOW OFTEN ?
 How often should the "meters" be read?
(4) HOW CURRENT ?
 How quickly should the "readings" be transmitted to management?
(5) HOW ACCURATE ?
 How accurate do the "readings" have to be?
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

32. MONITORING THE MARKET What ? Sales: Volume? Value?
Shares: Total Market? Segments?
How ?
Internal data
Market research
Call reports of sales force
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

33. MONITORING THE MARKET How Often ? Daily? Weekly? Monthly? How Timely ?
Enough advance warning to steer around the iceberg
How Accurate ?
Satisficing versus Numerical accuracy
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

34. Aggregating Data Evens out Market Fluctuations
How much information is lost when frequency of measurement is reduced.
Peaks is sales can be precisely seen with more frequency. A related question. Who provides this data? What incentive do they have to have to collect and provide it? Why would they NOT want to gather more frequently?
How often then? Related to how current which is related to how much and how accurate?
BUT… must be balanced with burden of collecting data
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

35. REQUIREMENTS OF A BI TO SUPPORT CONTROL
(1) Summary reports not useful
 they can hide problems
(2) Exception reports
 a "must" for reducing data overloads
(3) Drill-down capability to access detailed data
 to trace a problem to the root cause
(4) Graphics capability
 facilitates comparisons
(5) "What happened" is not enough
 analysis needed for "what if "
(6) Intelligent drill-down
 to signal problems at a detail level
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

36. “WHAT IF” ANALYSIS - An Example
Standard Sales Performance Report
Actual vs. Target vs. Last Period
Variances
% Achievement of Target
What are the implications of performance to-date?
THE Question : Will Annual Targets be achieved?
Compare Current Sales Speed with
Balance-To-Achieve Sales Speed
BTA Speed = BTA Target / Balance # of Months
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

37. Standard vs. “What If” Sales Reports
Standard Year-to-Date Sales Report for December
Product
Actual
Target
% of Target P1
100
120
83% P2
180
56% P3 90
111%
Totals
300
390
77%
“What If” Sales Report for December
Product
Actual
Annual Target
BTA
Current Speed
BTA Speed
Change P1
100
150 50
11.11
16.67
50% P2
240
140
46.67
320% P3
120 20
6.67
(39%)
Totals
300
510
210
33.33
210%
Fiscal Year: April-March
Dr. Lakshmi Mohan

38. What are Expert Systems?
A technology that enables expertise to be distributed in a firm without the presence of the human expert
Rule-Based System
If “This”, Then “That”
Rules are determined from expert knowledge and programmed in the software
Feedback Loop to Improve Rules
An HR Application
Screening a large number of resumes for relatively low-level positions with well-defined and precise skill requirements
- e.g., Call Center Agents
Expert System can weed out applicants who do not meet the requirements
Dr. Lakshmi Mohan

39. Using Expert Systems: Extract News from Scanner Data
The Promise: Better Data
Compared to Retail Store Audits
Frequency: Weekly vs. Bimonthly
Level of Detail: UPCs vs. Brands
Scope: Top 50 Markets vs. Regions
The Problem: Too Much Data
At least times more data
The Result: Impossible to Use Quality Data
Dr. Lakshmi Mohan

40. "CoverStory"- An Expert System Replaced The Human Analyst
Before . . .
 Companies circulated top-line reports, including tables and charts from the retail store audit data. An analyst prepared the cover memo highlighting important news in the data.
Now. . .
Not feasible to have an army of analysts to sift through the mountain of scanner data. Instead, "CoverStory" automatically writes this memo !
A model-imbedded expert system extracts the news from the data
Another expert system composes the memo using a built-in thesaurus to eliminate repetitious wording
Dr. Lakshmi Mohan

41. Case Example: Ocean Spray Cranberries
A $1 billion grower-owned agricultural cooperative
Lean IS staff
Only one marketing professional for analyzing the scanner data
Scanner data for juices is imposing
M numbers covering up to 100 data measures, 10,000 products, 125 weeks and 50 geographic markets
-- Grows by 10 million new numbers every four weeks
Dr. Lakshmi Mohan

42. Impact of CoverStory
Enables a department of one to alert all Ocean Spray marketing and sales managers to key problems and opportunities and provide problem-solving information
Being done across 4 business units handling scores of company products in dozens of markets representing hundreds of millions of dollars of sales
System is totally integrated into business operations because it delivers information of competitive value in running the business
Dr. Lakshmi Mohan

43. Automated Decision Technologies… … Are Coming of Age!
Best suited for decisions that must be made frequently and rapidly
Information for making decisions is available electronically
Knowledge and decision criteria must be highly structured
Good Example: Bank credit decisions
… Repetitive, Uniform Criteria; Plentiful Customer Credit Data Available
Poor Choice: Whom to Hire as CEO
… Rare Occurrence, Non-Standard Criteria (e.g., personal chemistry) that cannot be captured in a computer model
Benefits:
… More Consistent Decisions
… Respond Faster to Customers
… Leverage Scarce Expertise
… Reduce Labor Costs
… Enforce Policies
Dr. Lakshmi Mohan

44. Case Example: DeepGreen Financial Competitive Advantage – Automated Credit Decisions
Targeted Customers: High-end Borrowers
- Want a standardized loan for a small fraction of the value of their home
Created an Internet-based system in 2000
Customer completes home-equity loan application online in 5 minutes
Receives decision within 2 minutes in 80% cases
No upfront paperwork from borrowers
- Traditional appraisal of credit worthiness not required
USP: Speed, Service and Convenience
- NOT Interest Rates
- Can tailor loan terms to needs of individual borrowers
Skimming off customers with the best credit
8 Employees process 400 applications a day
5 years: Originated over $4.4B of home-equity lines of credit
Dr. Lakshmi Mohan

45. Automated Credit Decision Process
Joan applies online for loan ( 5 mins.)
Checks for Fraud & Flood Insurance
Joan’s Credit Report pulled out from Online Database
- Joan’s Credit Score is calculated by system
Joan’s Property Evaluation
- Based on Online Data
Loan Approved?
(2 mins)
System selects a Notary Public near to Joan’s home
YES NO
Joan chooses Closing Date
End
Loan documents printed from system express-mailed to the Notary
Notary visits Joan’s home to get signatures on loan documents
Dr. Lakshmi Mohan

46. DeepGreen’s Shrewd Strategy Feasible Because …
… All data needed to make home-equity loan decisions available online
… Relatively easy to make credit decisions involving affluent, low-risk borrowers
- Factors to be considered are well understood
- Experts can readily codify the decision rules
… High-end customers tend to be Internet-savvy
- Offer them what they need online, and they will come
Dr. Lakshmi Mohan

47. Lessons Learned
Identify Revenue Drivers and Cost Drivers with Significant Bottom-Line Impact – the “MUST DOs”
Examine the Current Management Process for Managing These Drivers - Improve the Process - Develop Detailed “HOW-TO” Procedures
Determine the Key Performance Indicators (KPIs) for Each Driver
Measure the KPIs - “Satisficing” Information is Enough - But, Macro Information is Useless - Micro Information Needed to Pinpoint Root Causes to Enable Corrective Action - “DE-AVERAGE”
Reward System Must Be Aligned to KPIs
Dr. Lakshmi Mohan

48. What Is Not The Solution
1. Give Users Access to the Data
- They will Drown in All That Data
2. System has Everything
- An Overdesigned System: NOT Usable
3. “Build It and They Will Come”
- Users need Help
“What to Do with the Information”?
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan

49. What Is The Solution - Some Pointers
1. A Rich Data Base
- Business Problems Cannot be Solved in the Aggregate
- Detailed Data Needed from Different Sources to Trace
Problems/Opportunities to the Root Causes
- Soft Data Vital in Marketing & HR
2. “Data” must be Converted into “Actionable” Information
- System Design Must Enable Users to
Glean the “News” in the Data
3. A Compact System
- Ability to Drill Down to Detailed Data Where Needed
4. Problem-Finding Capabilities Built into the System
- Ranking, Exception Reports, Trend Graphs
5. System Must be Inviting to Use
Dr. Lakshmi Mohan
Dr. Lakshmi Mohan