Transcript BS3912w1

Managing e-Business & High Technology

Introduction
»
»
»
»

Week 1
Module handbook
Plans for the semester
Overview of module content
Goals of the assignment
This week
» What’s special about high technology?
» How does it affect the way we Operate and Market?
Example: IBM in over 90 years
» E-Commerce and E-Business
BS3912 Week 1
1
What has Technology done for us?
1953
2011

“Middle-class” salary
£800

Comparable salary

House-price in Midlands £3K
Small family car
£800
<14” Television (B&W) £100
Radiogram (AM + disc)
£60
Computer (very slow) £300K
10” record, per minute
6p
Pint of milk
2p

House-price in Midlands£200K
Small family car
£11K
19” TV/DVD (TFT Colour)£125
FM/AM radio/CD (stereo) £50
Computer (much faster) £280
Music CD, per min.
2-25p
Pint of milk
50p












£18,000
We need to understand why these huge discrepancies arise
“Globalization” is part of it, as is the cost of input commodities
BS3912 Week 1
2
There is a pattern


Labour-intensive products and services have stayed at
fairly constant price in real terms
Manufactured goods have got cheaper because of:
» Improved efficiency
(this greatly outweighs lower unit labour costs)
» Reduced input content – things are smaller and lighter
» Simplification of design – tiny transistors replaced valves;
then one integrated circuit replaces millions of transistors;
mechanical components largely replaced
» Mass production – with increased degree of automation
» Migration of other production to low-cost countries

Increasing share of GDP is intellectual property products
» Movies, CDs, software – very cheap to reproduce
BS3912 Week 1
3
High Technology

The things that have dropped fastest in price are what I
class as “high technology”
» Television, radio, stereo
» Computers and equipment including microprocessors
» Cars and white goods, to the extent they are hi-tech
» Note that there is now global production of these products

The same goes for services
»
»
»
»
Bank charges were significant until IT revolution
Mail Order companies used to take big admin mark-up
Photo processing is faster and cheaper (and in colour)
Online brokers offer bargain dealing charges
BS3912 Week 1
4
High Technology Costs

Largely “up front” costs
» Create and test the chip; then “print” millions
» Design, code and test the program; then copy millions
» Research and write the book, make the film/programme

Advantage to big players – same costs, more earnings
» Especially if product is potentially global
» Or can be given local features by software changes

Competitors need to make a better or cheaper product
» Causes “feature creep” as in Office Packages
» Moore’s Law – ever faster processors from Intel and AMD
(is this why Apple abandoned Motorola?)
» Lower price memory, TFT screens…
BS3912 Week 1
5
Keeping up with the Tanakas

Product must meet market requirement

Need to exploit all opportunities for:
» Cost-reduction – better yield, fewer inputs…
» Quality enhancement – fewer problems for customer
» USPs (real or otherwise)

You can be sure that your competitors…
» Have a new version under development
» Will soon be able to undercut your price
» (and there may be others preparing to enter the market)

You need to enhance margins or get a new version first
BS3912 Week 1
6
So High Technology Companies...

Do best if they have a global market
» Can be achieved through international alliances

Embrace change, to:
» Increase sales
» Enter new markets
» Cut costs

Seek a fast “cycle time”
» New products developed before tail-off of old ones
» Product or production improvements before competitors
The conflict: Need a global organization with ability to take
quick decisions and deploy new ideas worldwide
BS3912 Week 1
7
Aside – Dilbert Episode 2
This may be a good time to see Scott Adams
perspective on managing a high-technology company
In the first episode, they decided to call the new
product the “Gruntmaster 6000”
BS3912 Week 1
8
IBM: An International Business

Started in USA with machine for 1890 census
»
»
»
»

Applied “punch card” technology to Business
Introduced automated time-clocks
1914: “International Business Machines” in Canada
1922: Whole corporation renamed IBM, and started
subsidiaries in most developed countries
Specialized in precision electro-mechanical products:
» Butcher-scales, time-clocks, card sorters and collators
» Bought electric typewriter company in 1930s
» Biggest manufacturer of gears in the world by 1945

US Government took action in 1950s to limit IBM’s
dominance of punch-card business
BS3912 Week 1
9
Years of Success

1914-1950
» Developed punch-card technology to dominate markets in
most of 1st world (development almost exclusively in USA)

1950s
»
»
»
»

Became major player in new electronic computer business
Came under pressure for dominating punch card market
Established global development and manufacturing
Invented “systems engineers”
1960s
» “Bet the company” on System/360 and succeeded
» Developed “must have” memory technology

1970s
» Abandoned this memory technology for semiconductor
» Came under renewed Anti-trust Act pressure
BS3912 Week 1
10
Management System

Highly centralized Development
» Laboratories in USA, Canada, UK, Germany, France, Japan
» All managed and funded by central Systems Development
Division (SDD) in USA

National Sales Organizations
» Able to respond to local opportunities
» Paying royalties back to Corporate

Manufacturing distributed but managed centrally
» Located to exploit skills and market opportunities
» and to keep IBM balance of trade approximately neutral
» Example, Large computers in France, medium in UK
BS3912 Week 1
11
International Structure

Marketing and Manufacture managed by region
» “Domestic” (US) operations
» “World Trade” initially dealt with the rest of the world
– then AFE (Americas/Far East) + Europe ME Africa
– then AFE split into Latin America, Canada and FE
– EMEA largely decentralized now

Development remained a Corporate responsibility
» Divisions handled particular product lines, e.g.
– Small mainframes in UK, D, CDN and Endicott NY
– Big mainframes based in Poughkeepsie NY
– Research in Yorktown NY, Almaden CA, Zurich CH
» Strong interdependence between laboratories
BS3912 Week 1
12
Strong Control – Brave Decisions

Mid-50s – switched from punched-card equipment to
electronic computers
» IBM was dominant in punched card, not in computers

1971 – ditched magnetic memory in favour of chips
» IBM was most efficient producer of magnetic cores
(competitors all licensed the IBM patents)

Pre-emptive strikes against technology substitution

Alas, didn’t do the same in the 80s
» PC developed on a shoestring
» Not integrated into Corporate strategy
» Grossly underestimated competence of Microsoft
BS3912 Week 1
13
Over-complexity

1970s
Threat of Anti-trust action led to separation of Divisions
» Large Systems; Smaller Systems; Office Products
» Consequence was duplication of development and marketing
effort, and increasing cycle time
» But still appreciated risk posed by Apple II in 1979

1980 to 1995
» Further separation of divisions into “Lines of Business”
(an extra layer of management)
» PC developed outside traditional structure – incompatible
with IBM systems and dependent on Microsoft
» Underestimated quality and market-awareness of Microsoft
(“Windoze” was much faster than IBM’s OS/2)
BS3912 Week 1
14
1990s – Recovery



Recognized value of customers’ investment in mainframe
software and systems
New focus on “Servers” – mainframe and mid-range;
embraced Web Services
Major effort to reduce mainframe cost of ownership
(already lower than PC equivalent, similar to Unix)
» Developed new family of C-MOS processors
» Software focus on parallelism and management tools to
conceal complexity
» Virtual organizations for collaborative development

PCs – concentrated on Corporate niche
» Bought Lotus and developed the “Notes” line
» Too late to beat Microsoft: abandoned OS/2 and started
pushing Windows NT as associate for mainframes
BS3912 Week 1
15
Parallel Sysplex Development

The problem
» Mainframe technology (ECL*) fast, but hot and costly
» Not competitive with PC technology (CMOS*)

The solution
» Build collections of CMOS chips working in parallel
» Find some way to make them run existing applications

Logistics
»
»
»
»
Boeblingen in Germany was brilliant at CMOS chips
Poughkeepsie could integrate mainframes
Hursley could make CICS efficient on new hardware
Santa Teresa and Toronto could fix up the database
BS3912 Week 1
* you don’t need to know these are Emitter Coupled Logic
and Complementary Metal Oxide Semiconductors
16
How do you communicate?

Used to be hierarchical, backed up with Executive visits
» Later meetings video-recorded and played in cafeterias

Education was by
» Classroom-based technical and management education
(local, national and regional – major centre in Belgium)
» On-line instruction and reference services

Written communication from 1980 by “PROFS”
»
»
»
»

E-mail, calendars, document sharing and transmission
Extended to virtual notice-boards, online forms …
Based on VM/370 terminal and proprietary network
Same hardware used for computer conferencing
From 1995, moved on to PCs and Internet protocols
BS3912 Week 1
17
Dynamic Workplaces


This was the subject of an IBM/Lotus seminar in 2002
Concept is that the nature of work is changing:
»
»
»
»

Less geographically determined
Involves more and changing professional interactions
Personal goals are becoming more of a constraint
Geography and hierarchies are less constraining
This is largely driven by technology
»
»
»
»
»
Mobile phones and the “mobile office”
Hot-desking when you are in the office
Internet and distributed access to corporate data
Ability to get work done in a different time-zone
Impact of broadband only just being seen
BS3912 Week 1
More
later
18
Big evolution – Big Pay-Off

Benefits to IBM
» e-learning: over $350 million
in 2001
» Customer self-service:
over $700M
» Blue Pages:
estimated $10M
» Consolidating News Sources:
$2M
» HR Process Reengineering:
reduced costs by 40% and
increased satisfaction to 92%
» e-Workplace: Key tool to
changing the culture of IBM
BS3912 Week 1

Benefits to Employee
70
60
50
40
30
20
10
0
Impact on Work
Positive
Impact on Personal Life
No Impact
Negative
D071: The overall impact of mobile work/work at home on
your work at IBM
(from 2002 IBM seminar)
19
Sites on Portal reflect a Federation Model
Personal Systems
Server Group
Asia Pacific
Global Services
EMEA
Corporate homepage
Software Group
Research
Sales & Distribution
BS3912 Week 1
20
e-Commerce and e-Business

IBM is in the business of making high-tech products

But any business can depend on technology whatever its
product:
» Either by how you make it – Computer Integrated
Manufacturing, Supply Chain Management
» Or by how you market it
» Or by how you sell it – e.g. by e-commerce
» Or how you run the organization – Enterprise Resource
Planning, electronic HR…
» Can also allow loose federations to function as a virtual
organization

These will be key considerations over the next 11 weeks
BS3912 Week 1
21
Assessment

This consists of two assignments, both based on an
organization you choose to study

The organization can be a real one, or
a start-up company you propose and describe

No two students will study the same company or proposal
» Eric will maintain a list; make your bids as soon as you can

Each assignment carries 50% of the module mark
» Don’t worry about stealing the thunder of your second
assignment in the first
BS3912 Week 1
22
Assignment 1: Due date: 6 May 2011

Assignment takes the form of an initial business proposal
for one of the following:
» a start up e-business company,
» introduction of a high-technology product, or
» introduction of e-business activities to an existing company

You will need to come up with a suitable innovation:
» Write enough to explain what is proposed
» Analyse the opportunity, risks and capital requirement


The assessment is concerned with your ability to analyse
the business-case, rather than with the quality of the
innovative idea itself
Needs handing in BEFORE the lecture!
BS3912 Week 1
23
Assignment 2: Due 6 June 2011

You need to prepare and write a detailed plan for
deploying the change you proposed, into the same
existing or start up e-business company

Assessment criteria concentrate on your understanding of
the issues involved in managing high-technology ventures,
and the logic and clarity of your analysis

If you are not around to hand in the assignment in person,
please make sure you use recorded delivery and that the
package is postmarked on or before the due date
» Or you could arrange electronic submission on the LN
BS3912 Week 1
24