Transcript Ch 6 - Vision

What’s 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-ups—the ones most likely to hire new people.
“These are the kinds of jobs that won’t be leaving
the country.”
Andy Grove’s Five Key Principles
1.
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.
Andy Grove’s 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.
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.
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
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%
Chapter 5 Summary
Information Systems Can
Redefine Competitive
Boundaries
Chapter Topics
A. Interorganizational Systems
B. Strategic Business Alliances
C. Electronic Data Interchange (EDI)
(extranets versus EDI)
With an added dose of globalization.
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.
Interorganizational System
Goals

Efficiency

Effectiveness

Competitive Advantage
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.
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.
Strategic Alliances
Why establish a strategic alliance?
 To build a combined capability that makes it a
stronger competitor.
 Extended enterprise against the competitor’s
extended enterprise.
 Difficult, costly and risky to try to deal with the
challenges of a global business.
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.
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.
Global Motivation
Offense/Defense—Opportunities/Threats
Global economies of scale to recoup R&D and capital costs.
Build and strengthen global brands—economies 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.
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.
Chapter 6 Introduction
Business Vision
By Steven Levchenko
Section II
The Company Environment
•Business Environment
Specific Industry
•Enterprise Environment
The Company Itself
•IT Environment
Used for competitive advantage
Business
Success
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.
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.
Vision
Leadership
Strategy
Tactics & Business Plan
Agreement/Commitment
Implementation
Feedback
Business Vision Process
Sensing Opportunity
Leadership
A major premise of this course is that successful
companies are the result of good leadership in two forms:
1. Companies need to be run well from an
operational standpoint.
2. They also need to be well directed and this is
accomplished through an effective vision that is
communicated throughout the organization.
Chapter 6
Business Vision
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.
The essence of competitiveness is
vision, leadership and a hunger to
succeed.
P. R. Vagelos
Chairman and CEO
Merck
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.
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 things—where 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.
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.
Microsoft Vision
Empower people through great
software, anyplace, any time and
on any device.
Values
Beliefs
Principles
Mission
Vision
Goals
Strategies
C
u
l
t
u
r
e
Tactics
Objectives
and
Measurements
Business
Plan
Authority
and
Responsibility
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.
Gerstner’s 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 visionhungry pundits wrong.
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."
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.
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 IBM’s primary focus from hardware to services
and from mainframes to the Internet and software.
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.
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
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
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.
“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
The Vision to Action
Process
Implementation
(Action)
Agreement &
Commitment
Tactics and
Business Plan
Strategy
Feedback
Vision
Sensing
Opportunity
Figure 6-1
Vision Examples
• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.
• Gil Amelio at National Semiconductor
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.
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.
Information systems are strategic
weapons, not cost centers.
Robert F. McDermott,
Former USAA CEO
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.
USAA Vision 2000
An Events Oriented Organization
Needs
Member (Customer)
Key Points
Security
Quality
of Life
Supporting
Systems
Insurance
Products
Consumer
Services
Products
Wants
Asset
Management
Financial
Services
Products
Figure 6-2
USAA’s ultimate goal is to manage
its customer relationships and not
its individual products.
How does this relate to information systems?
USAA Videotape
USAA Products and Services
So integrated that members lose
something if they go elsewhere.
USAA Business and IS Goals
1. Customer Convenient
2. Operator Efficient
3. Cost Effective
Information Systems Strategies
• Executive Partnership
• Strategic Architectures
• Technology Experimentation
• External Resource Leverage
• Technology Assimilation
• Horizontal Integration
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 AT&T Trunk Lines: 94 million annual
telephone calls representing 90% of business
transactions.
• 1,300 Information Systems people. (ITCo)
12/31/99
USAA Image Processing
Mainframe Computer
A
Folder
Management
P
Application
Document Database
Direct Access
Storage Drive
Inner
Server
I
A
Storage
P Manager
Direct Access
Storage Drive
I
API
Token Ring
LAN
Application
Workstation
Application
Workstation
[
Image Workstation
]
Scanner
Image Workstation
On-line
Optical Disks
Service
Representatives
Optical Storage
Library
(Not On-line)
Figure 6-3
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.
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.”
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.
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
Stock Performance
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 Whirlpool’s global leadership position, the
company’s unique global platform and innovation
activities focused on building customer loyalty will drive
continued performance improvements in 2004 and beyond.
Whirlpool Corporation
Principal Products
Automatic Dryers
Automatic Washers
Dehumidifiers
Dishwashers
Freezers
Microwave Ovens
Ranges
Refrigerators
Trash Compactors
Room Air Conditioners
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.
Appliance Brands
Whirlpool
Maytag
GE
Electrolux
Kitchen Aid
Roper
Whirlpool
Admiral
Hardwick
Hoover
Jenn-Air
Magic Chef
Maytag
Norge
GE
RCA
Hot Point
Frigidaire
Gibson
Elna
Eureka
Kelvinator
O’Keefe and
Merritt
Tappan
WhiteWestinghouse
Kenmore*
* Manufactured for Sears
Differentiation Strategy!?
• Clothes Management System
• Food Management System
Whirlpool Strategic Design
• Mission Statement
• Vision
• Value Creating Objectives
• Shared Values
• Worldwide Excellence System
Whirlpool Corporation
How 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
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 worldwide large appliance industry.
Whirlpool Mission Statement
To shape and lead the major home
appliance industry globally, becoming
one of the world’s great companies
while creating value for shareholders,
employees, customers, suppliers,
government leaders and communities.
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.
Pyramid of Excellence
Stakeholder Value
Where
Way
What
Value Creating
Objectives
How
Worldwide
Excellence
System
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
Platform for Global Success
1. Product Technology.
2. Procurement.
3. Information Systems
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.”
Worldwide Major Appliance
Industry
United States
Whirlpool
General Electric
Maytag
Japan
Matshushita Electric
Hitachi
Sweden
Electrolux
Korea
Samsung
Figure 6-5
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:
- Japan’s first transistors in 1954.
- Japan’s first transistor radio in 1955.
- First Japanese company to be listed on the NYSE.
- First Japanese company to build a U.S. factory.
Sony
Morita told engineers to make Walkmans despite the
lack of market research. “We don’t 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.
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.”
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.
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.
Good Vision Statement?
We want to sell a variety of
products on a daily basis to
every living person on the earth.
PepsiCo.
Good Vision Statement?
To be the world leader in
transportation products
and services.
General Motors Corp.
A Good Vision Statement?
To continue to be the world’s best way to pay
and be paid for consumers and businesses.
Visa International
Good Vision Statement?
Absolutely, positively overnight!
Federal Express
Good Vision Statement?
To make the maximum computing power
available to a broad user audience through
open technologies.
Sun Microsystems
Sun Vision Statement
To be an industry leader, you need vision.
But that’s just the beginning.
You also need the people, products, and
relationships to take your vision to market and turn
it into a compelling reality.
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
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, don’t 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.
Good Vision Statement?
Do it, try it, fix it!
Wal-Mart Stores
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
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.
Wal-Mart
If you are not serving the customer or
supporting the folks that do, then we don’t
need you.
Wal-Mart Core Values
1. We exist to provide value to our customers—to 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.
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.
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.
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.
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.
Founding Dates
1812 Citicorp
1911 IBM
1837 Procter and Gamble
1915 Boeing
1847 Phillip Morris
1923 Walt Disney
1850 American Express
1927 Marriott
1886 Johnson & Johnson
1928 Motorola
1891 Merck
1938 Hewlett-Packard
1892 General Electric
1945 Sony
1901 Nordstrom
1945 Wal-Mart
1903 3Com
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.
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.
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!
A Logical Vision Process
• Define the Business Environment.
• Build a Company Vision.
• Turn the Vision into a Plan.
• Drive Action with the Plan.
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.
Invest
Vision
Save
Money
Asset
Applications
Networks
Expense
Strategic
Tools
Tactical
By instilling:
You create:
Which results in:
Leadership
Improved
Performance
Vision
Market
Impact
Strategy
Tactical
Excellence
Innovation
A Great
Company
Excellent
Reputation
Sustained
Success
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.