1. What’s Happening?! Federal Reserve comments regarding interest rates spooked the stock market. An increasing number of TV stations that broadcast in digital e multicasting which further increases the number of available channels. Superbowl Sunday will bring the latest in colossal TV ads. San Jose mayor had a mild stroke while delivering his annual state of the city address.

2. Revised Course Syllabus Has been updated on the course web page. Feb. 10 is not Advisement Day! Feb. 5 – Section I and II are due. Feb. 12 – Midterm Exam Feb. 19 – Bob Sanguedolce, eBay Mar. 9 – Student ATP presentations Mar. 11 – Final class Mar. 16 – Final exam

3. Chapter 6 Summary Business Vision

4. Chapter Objectives Positioning vision as the starting point in directing, posturing and running a business. Understanding the significance of the vision process. Remembering that vision triggers the entire business and information technology management process

5. What is a Vision? A photograph of the future It must be realistic and credible -- and most certainly attractive to the organization Concrete and easily understood ideas about the long-range future of the business

6. What Must Be Accomplished – –Establish a clear vision of the future – –Provide a basis for sharing values and views – –Send a message regarding the importance of the vision process throughout the entire organization to gain consensus and momentum

7. Sensing Opportunity Vision Strategy Tactics and Business Plan Agreement & Commitment Implementation (Action) Feedback The Vision to Action Process

8. Vision Uncertainty The dynamics of the market The dynamics of the market Rapidly changing technologies Rapidly changing technologies The logic and need to address changing employee values and traditional methods The logic and need to address changing employee values and traditional methods The shift from old regulatory practices to new practices in many industries The shift from old regulatory practices to new practices in many industries

9. Customer Service Frequently Drives the Vision! Frequently Drives the Vision! For USAA, General McDermott’s four step process: For USAA, General McDermott’s four step process: –Automation –Employee attrition –Improved job training –Decentralized decision making through empowering employees

10. Role and Contribution of IS A horizontal integration of applications A horizontal integration of applications An executive partnership An executive partnership Technology experimentation and assimilation Technology experimentation and assimilation Leveraging their information systems Leveraging their information systems Strategic architecture Strategic architecture

11. Whirlpool’s Global Vision Taking a company’s best capabilities and leveraging them in its worldwide operations Stakeholder Value Measurement & Results Customer Satisfaction Strategic Planning Fact-Based Management Customer Satisfaction People Commitment Values Vision Worldwide Excellence System Value Creating Objectives Whirlpool People Quality Process & Products Leadership Growth & Innovation Total Quality Where Way What How

12. Conclusions Successful companies are the result of good leadership. Successful companies are the result of good leadership. Talented leadership is demonstrated in the following forms: Talented leadership is demonstrated in the following forms: –Determining the direction of the business. –Operational efficiency and effectiveness. –Implementation and maintenance of a well directed information system.

13. Possible Exam Questions 1. What factors influence the creation of a vision? 2. What impact does a vision have on information systems?

14. Chapter 7 Introduction Implementing a Vision: Strategy, Tactics, and Business Plan

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

16. Chapter 7 In Just One Slide! Vision: What the company wants to look like in the future Vision: What the company wants to look like in the future Strategy: Ideas on how to accomplish the vision, by doing an internal and external analysis of the company. Strategy: Ideas on how to accomplish the vision, by doing an internal and external analysis of the company. Tactics: The specific, time-oriented method of implementing the decided strategies. Tactics: The specific, time-oriented method of implementing the decided strategies. Business Plan: The plan for allocating company resources. (a.k.a: Operating Plan or Budget) Business Plan: The plan for allocating company resources. (a.k.a: Operating Plan or Budget) The Four Components to Implement a Vision

17. The Three Components of a New Strategy Vision External Assessment Internal Assessment A New Strategy

18. Elements of a Business Strategy Competitive framework: What market are you in? How big is it? Who are your competitors, and what are their strategies? Competitive framework: What market are you in? How big is it? Who are your competitors, and what are their strategies? Market target: What type of customer are you selling to? What are their needs, attitudes, and priorities? Market target: What type of customer are you selling to? What are their needs, attitudes, and priorities? Basis for perceived competitive superiority: How do your customers define your product or service as superior? Basis for perceived competitive superiority: How do your customers define your product or service as superior? Key profit drivers: What makes your product or service profitable? Key profit drivers: What makes your product or service profitable? Product portfolio: Interrelating a product or service with the above four points. Product portfolio: Interrelating a product or service with the above four points.

19. Breakdown Relative to New Strategies: Internal Analysis External Analysis Vision:

20. Tactics and Their Implementation Strategies are passed down from Senior Management to various employees in the organization. Strategies are passed down from Senior Management to various employees in the organization. These employees use their various skills to implement these strategies. The implementation is called a tactic. These employees use their various skills to implement these strategies. The implementation is called a tactic.

21. Business Plan The business plan could be a very broad subject, but here is one possible explanation: The business plan could be a very broad subject, but here is one possible explanation: A business plan can be formed by analyzing the successful tactics implemented by a company. A business plan can be formed by analyzing the successful tactics implemented by a company. The tactics provide details as to how the company should allocate its resources. The tactics provide details as to how the company should allocate its resources.

22. Summary of Progressive Corporation’s Strategies Change the definition of the business and financial objectives to ensure long term success. Change the definition of the business and financial objectives to ensure long term success. Change the primary market segment they would serve. Change the primary market segment they would serve. Streamline internal operations. Streamline internal operations. Create new information systems to accommodate their new business strategies. Create new information systems to accommodate their new business strategies.

23. Conclusions Information systems can be a competitive resource as long as they support the right business strategies. To develop a strategy, a company should decided what things are worth doing, and most importantly, these things should be achieved.

24. Chapter 7 Implementing a Vision: Strategy, Tactics and Business Plan

25. 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

26. Primary Business Challenges Deciding what things are worth doing. Getting things done!

27. 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.

28. When 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.

29. Defining the Three Key Elements 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.

30. Business Strategies!? How important are they, really? Do business strategies really make a difference between success and failure of a company?

31. Business Strategies Every company has a competitive strategy, either explicit or implicit. The strategy may have been developed through a planning process or it may have evolved through the activities of various functional departments. Left on its own, each functional department will inevitably pursue approaches dictated by its professional orientation and/or the incentives of those in charge. The sum of these departmental approaches rarely produces the best strategy for the company.

32. Business Strategy There are significant benefits to be gained through a process to formulate strategies that insure that at least policies, if not actions of functional departments, are coordinated and directed at a common set of goals. Developing a competitive strategy involves creating a process on how a company is going to compete, what its goals should be and what policies are needed to achieve those goals.

33. Need to ask the following questions: 1.What is driving competition in our industry or one that we might enter? 2.What actions are competitors likely to take and what is the best way to respond? 3.How will our industry evolve over time? 4.How can we be best positioned to compete in the long run?

34. Strategy Consistency? 1.Internal Factors 2.Resource Factors 3.Environment Factors 4.Communication and Implementation Considerations

35. Strategy Consistency? Internal Factors: Are the goals achievable? Do key operating policies address the goals? Do key operating policies reinforce each other? Resource Factors: Do the goals and policies match the resources available to the company relative to competitors? Does the timing of the goals and policies reflect the company’s ability to change?

36. Strategy Consistency? Environment Factors: Do the goals and policies exploit industry opportunities? Do the goals and policies deal with industry threats that are possible with available resources? Does the timing of the goals and policies reflect the ability of the environment to absorb the planned impact. Are the goals and policies consistent with societal concerns?

37. Strategy Consistency? Communication and Implementation Considerations: Are the goals understood by the implementers? Is there congruence between the goals and policies and the values of the implementers to insure commitment? Is there sufficient management capability and availability to assure effective implementation?

38. Competitive Strategy Process A. What is the company doing now? Current strategy? Assumptions about the company’s relative position, strengths and weaknesses, competitors and industry trends.

39. Competitive Strategy Process B. What is happening in the business environment (industry). Validity of industry opportunities and significance of threats. Key factors for competitive success. Capabilities and limitations of existing and potential competitors. Company strengths and weaknesses relative to present and future competitors?

40. Competitive Strategy Process C. What should the company do? Test the assumptions and strategy. Consider alternative strategies. Chose the strategy that best relates to the company’s situation relative to external opportunities and threats.

41. IEA Internal External Action

42. Progressive Corporation 1988 Performance Record Revenue Record Earnings Outstanding Company Culture Highly Respected Business Leader Well Regarded Company Could Things Possibly Be Better?

43. Progressive 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.

44. Progressive Corp. Business Progressive decided that it was really in the business of reducing human trauma and economic costs of auto accidents.

45. Progressive Corp. Vision We seek to be an excellent, innovative, growing and enduring business by reducing the human trauma and economic costs of auto accidents in cost-effective and profitable ways that delight customers.

46. Progressive’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.

47. Curtail Diversification. Reduce Operating Expenses. Assign Business Process Ownership. Establish a New Employee Compensation System. Progressive’s New Business Strategies

48. IS Support of New Strategies Express Quote Service. Immediate Response System.

49. Vision, Customer Value Proposition, Core Values and Objectives 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.

50. Progressive Customer 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.

51. Progressive 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.

52. Progressive 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.

53. Progressive 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.

54. Peter Lewis Currently Chairman of the Board “We sell speed, not insurance.” Glenn Renwick, President and Chief Executive Officer Raymond Voelker, Chief Information Officer

55. IS 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.

56. Information Technology Impact Information Technology Work OrganizationPeople Information

57. Information Technology Impact Information Technology Work OrganizationPeople Information 10 day information float Route SalesmanRegional Competitors Increased complexity for route salesman and plants Semi-automated batch system (out-dated)

58. Information Technology Impact Information Technology Work OrganizationPeople Information Reduced information float to 24 hours Route Salesman Account Specialist Merchandiser Decentralized Marketing Organization Increased complexity for route salesman and plants Communications Network and Hand-held Computer

59. Yum! Brands KFC Pizza Hut Taco Bell Long John Silver All American Food (A&W) Created as Tricon Global Restaurants on October 6, 1997 as a spin off from Pepsi.

60. Yum! Brands The world’s largest quick service restaurant company with nearly 33,000 units in more than 100 countries. 36% are outside the US

62. 2002 Financial Performance Realized $7.7 billion in total revenue which was a 12% growth with $866 million from franchise and license fees Operating earnings of $1 billion was a per share growth of 19%. Expanded the international unit portfolio by opening 1, 051 new units. Increased international operating profits by 22%.

63. Long Term Goals 1.To be the premier global restaurant company. 2.Transform the Quick Service Restaurant industry with multi-branding. 3.Become the best restaurant company investment.

64. Business Strategies 1.Drive International Growth 2.Multi-brand Great Brands 3.Improve Operations of Brand Portfolio with Customer Mania

65. International Growth In 1992 McDonalds had 4,000 international restaurants. Today it has over 16,000 with a $1 billion profit from these operations. Yum! has 11,800 (6,800 KRC and 4,400 Pizza Hut) with nearly $400 million in international profit. Burger King is third with a profit of $50 million.

67. International Growth Focus International Growth Focus Seven countries but China, UK, Mexico and Korea will receive most of the capital investment with an objective of opening 1,000+ new international units. China currently has 800 KFCs and 100 Pizza Huts with plans to open 200 new units per year. 65% of this growth will be through joint venture partners and franchises.

68. International Challenges 1.Customer food preference and taste. 2.Standard of living—product cost. 3.Currency fluctuations. 4.Brand strength and unit consistency. 5.Distribution system. 6.Building an international team for the company.

69. Multi-branding Typically, sales rise at least 20% when a second brand is added to another Yum! brand. Has added $100,000 to $400,000 to a unit. Multi-branding gives customers more choices and variety. McDonalds has been the envy of this industry since its units average $1.6 million a year (almost twice that of Yum!) Pasta Bravo will be tested as a multi-brand with Pizza Hut. 40% of multi-branding is being done by franchisees.

71. Improving Operations Training 840,000 employees each quarter on how to be customer maniacs.

73. Internal Assessment External Assessment The Three Components of a New Strategy Vision A New Strategy Figure 7-1

74. Strategy Considerations Competitive Environment Market Target Basis for Perceived Competitive Advantage Key Profit Drivers Product and/or Service Portfolio Hello, Porter Competitive Model!

75. Additional 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.

76. Strategy-to-Tactics Implementation 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.

77. Managing for Results Objectives Authority Responsibility Training Motivation Performance Results Reward Control Figure 7-4

78. Senior Management Strategy Implementation Vision and Macro Strategies Empowered Implementers Micro Strategies and Tactics Company Culture Risks to be Avoided Business Uncertainties Critical Performance Factors Key Enterprise Business Processes Figure 7-3

79. Information 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

80. Strategic Management Process

81. Competitive 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?

82. SWOT 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

83. SWOT 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

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

85. A Logical Approach Find a tactic that will work. Build it into a strategy.

86. Employee downsizing, right-sizing or dumb-sizing (take your choice) should not be based solely on cost cutting.

87. Smart 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.

88. Company Infrastructure Data Management User Applications Voice Management Network Management Plan Process Financial Strategy Organization Figure 7-7

89. 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

90. IT Based Strategies MARKET PLACE OPERATIONS SIGNIFICANT STRUCTURAL CHANGE TRADITIONAL PRODUCTS AND PROCESSES Federal Express USA Today Charles Schwab Whirlpool Xerox BancOne Boeing Frito-Lay Wal-Mart USAA L.L. Bean McKesson Figure 7-6

91. Re-engineering Total Quality Management Right Sizing Which Way Should the Arrows Go? Business Vision and Strategies

92. Conclusions 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.