What’s Happening?! Bill Gates wants to entertain you with digital devices and services – keynote speaker at the Consumer Electronics Show. Tsunami business and political implications? Bush attempt to limit liability law suit awards. The governator’s latest plans and strategies. ISM Thought for the Day This IT stuff is hard. What a company really wants is somebody that can help implement it. Lou Gerstner, retired CEO IBM Corp. Presentation Assignments 1. Introduce Chapter 1 – James Hendrix 2. Summarize Chapter 1 – Rebecca Sherrill 3. Introduce Chapter 2 – Mitchell Paulsen 4. Summarize Chapter 2 – Jonathan Gregorio 5. Introduce Chapter 3 – James Schultz 6. Summarize Chapter 3 – Kim Nguyen 7. Introduce Chapter 4 – Michael Arias 8. Summarize Chapter 4 – Jason Demant Oral Presentations 9. Introduce Chapter 5 – Cyrus Semnani 10. Summarize Chapter 5 – Tan Nguyen 11. Introduce Chapter 6 – Jackey Liu 12. Summarize Chapter 6 – Adam Thompson 13. Introduce Chapter 7 – Chris Johnson 14. Summarize Chapter 7 – Vladimir Gorenshteyn 15. Introduce Chapter 8 – Rashi Sinha 16. Summarize Chapter 8 – Li Zhu 17. Introduce Chapter 9 – Daniel Lifschitz 18. Summarize Chapter 9 – Kevin Wang FYI If you email me send it to my school address which is automatically forwarded to me at home. Only two people indicated an interest in Toastmasters. Due Today 1. Introduction Letters and personal resumes. 2. Requests for the company that you will base your analysis term paper on in priority sequence. Given your understanding of the content of this course Let’s begin. Chapter 1 Introduction Business and Information Systems Management Challenges By James Hendrix Objective of the Chapter To introduce the major business issues that must be addressed to successfully manage a business and factors that would influence the possible role of information systems as an enabler of business success. Important to remember that this chapter is an overview of the entire class. Major Chapter Topics 1. Business Success Factors. 2. Three Necessary Perspectives. 3. The Many Simultaneous Revolutions in the Business Environment 4. A Business Driver Model. 5. A Systematic Approach for the Use of Information Systems. 6. Three Roles of Information Systems. Business Success Factors The chapter cites eight such factors with an emphasis on business leadership, company culture and effective communication. The list would undoubtedly vary in order of importance from one executive to another, one company to another and between different industries. Three Necessary Perspectives •Business Environment Specific Industry •Enterprise Environment The Company Itself •IT Environment Used for a competitive advantage Business Success Simultaneous Revolutions New Competitors New Rules of Competition Industry Structure Changes New Political Agendas The Business New Technologies New Employees and New Values New Regulatory Environment Increasing Customer Expectation Business Drivers Market Technology Employees/ Work Regulation Organization Business Processes Solutions to Business Requirements Figure 1-3 Three Roles of Information Systems Efficiency: Doing things better. Effectiveness: Doing better things within the organization. Competitive Advantage: Doing better and new things for customers. Systematic Approach to IS Vision Strategy Tactics Business Plan •Competitive Options •Roles, Roles, and Relationships •Redefine/Define •Telecommunications as the Delivery Vehicle •Success Factor Profile In Conclusion The journey of a thousand miles begins with a single step. -- Chinese Proverb Here is our roadmap, let the journey begin. Vision Strategy Tactics Business Plan •Competitive Options •Roles, Roles, and Relationships •Redefine/Define •Telecommunications as the Delivery Vehicle •Success Factor Profile Chapter 1 Business and Information Systems Management Three Necessary Perspectives • Business Environment • Enterprise Environment Business Success • IT Environment Figure 1-1 Why 3 perspectives? Business Today Moves in a Nonlinear Way There is no continuity in the flow of competition. It is very difficult to predict which products will succeed. It is very difficult to predict which companies will succeed. Competitive advantage is often fleeting. Technology and markets change so frequently and radically that yesterday’s assets can become today’s dead weight. Are Managers Obsolete? Complexity theorists argue that management counts for little in a world of radical discontinuity. In such an environment things happen so quickly that employees must be empowered to make decisions and to act upon circumstances as they occur. So why do the best-led companies so often prevail? A Fundamental Premise Innovative Uses of Information Systems Requires a Systematic Approach 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 Logical Premise Competing with Information Technology through People. IS Roles (Objective) 1. Efficiency--doing things better. 2. Effectiveness--broadening the scope of individual tasks, jobs or processes. 3. Competitive Advantage--doing better or new things for the customer. Are each of these roles measurable? Key to Business Success Competitiveness is often the pivotal issue in the current business environment. Global competitiveness has often become an integral part of this issue. (an offense/defense decision) Competitiveness How does a business compete? What benefits does a business gain if it competes successfully to the point of being a market leader? Market Leader Benefits? Increased volumes. Lower unit cost. Higher profit margins. Ability to invest in product development and market exploitation. Increased brand strength. Satisfied customers. Customers less likely to substitute. Lower probability of new entrants. Happy, motivated employees and other stakeholders. Purpose of a Business The purpose of a business is to create a customer. For this reason a business has a basic function and a need to emphasize: 1. Marketing. 2. Innovation. This demands that a business define its goal as the satisfaction of customer needs. Who is the Customer? Not a simple or intuitively obvious question. There is never the customer but multiple customers that are frequently different. Each customer has possible different expectations and values and may think that it is buying something different or for a different reason. Where is the Customer? An increasingly important question. Greatly influenced by increasing mobility on a global basis. What does the Internet do to questions regarding where is the customer? A Successful Business The right business model now and for the future. • Is responsive, flexible, adaptable, innovative, resilient, talented and financially strong. • Provides value to customers. Is anything else necessary to achieve and sustain business success? Running a successful business is like doing a jigsaw puzzle. The problem is that the pieces and the picture are both changing. Cyril J. Yansouni Chairman and CEO Read-Rite Corp. Using IS to Compete 1. Not a new topic. 2. Was relatively new in 1984. 3. The American Hospital Supply story goes back to the 1960’s. My Selection Criteria Started with the list of companies in the In Search of Excellence book. Frito-Lay, American Airlines, Boeing Emphasized the role of senior management to focus the role of information systems on key business strategies from the very beginning. Also how IS was used to make significant changes. Quickly discovered that good companies could point me to other good companies. Wal-Mart, USAA, Federal Express, Schwab, L.L. Bean Using IS to Compete • American Airlines • L.L. Bean • Boeing • National Institutes of Health • Federal Express • Progressive Corp. • Frito-Lay • Charles Schwab • Frost Inc. • Security Pacific Bank • IBM Canada • USAA • Marion Laboratories • University of South Carolina • McKesson Corp. • Wal-Mart Stores Business Success Factors 1. Business Leadership. 2. The Ability to Fit the Pieces into the Increasingly Bigger Business Picture. 3. Organizational Responsiveness and Resilience. 4. Realizing That Most Major Customer Problems Are Solved Through a Combined Organizational Effort. Business Success Factors 5. A Strong Company Culture. 6. Ability and Willingness to Innovate, Change and Take Risks. 7. Accomplishing All of These Factors While Maintaining a Necessary Balance. 8. Effective and Timely Communication Across the Entire Organization. Books on Business Success In Search of Excellence: Lessons from America's Best-Run Companies by Tom Peters and Robert Waterman, 1982 (43 companies) Built to Last by Jim Collins and Jerry Porras, 1994 (20 companies) Good to Great by Jim Collins, 2001 (11 companies) Built to Last The objective in a six year study was to systematically identify visionary companies, to examine how they differed from comparison companies to understand the underlying factors that account for their extraordinary long term position. Visionary companies were identified based on their having distinguished themselves as a very special and elite breed of institutions. Built to Last Companies 3M Marriott American Express Merck Boeing Motorola Citicorp Nordstrom Ford Phillip Morris General Electric Procter & Gamble Hewlett-Packard Sony IBM Wal-Mart Stores Johnson & Johnson Walt Disney Good to Great Companies • Abbott • Nucor • Circuit City • Philip Morris ** • Fannie Mae • Pitney Bowes • Gillette • Walgreens • Kimberly-Clark • Wells Fargo • Kroger Selection Criteria • Premier institution in its industry. • Widely admired by knowledgeable businesspeople. • Made an indelible imprint on the world in which we live. • Had multiple generations of chief executives. • Been through multiple product (or service) cycles. • Founded before 1950. Selection Criteria Started with Fortune 500 ranking of 1,435 largest publicly traded US companies in 1965, 1975, 1985 and 1995. Did a sophisticated analysis of compounded annual return looking for companies that showed a pattern of above average returns preceded by average or below average returns. This reduced the list to 126 companies. Analyzed the cumulative stock return relative to the general market looking for good-to-great stock return patterns. Reduced the list to 19 companies. Dow Jones Industrial List •Alcoa •Exxon Mobil •McDonald’s •Honeywell •General Electric •Merck •American Express •General Motors •Microsoft •AT&T •Hewlett-Packard •3M •Boeing •Home Depot •Philip Morris •Caterpillar •Intel •Procter & Gamble •Citigroup •IBM •Coca-Cola •International Paper •SBC Communication •DuPont •JP Morgan •Eastman Kodak •Johnson & Johnson •United Technology •Wal-Mart Stores •Walt Disney Business Challenges 1. Regardless of whose list of successful companies one relates to, what role should (better yet, did) information systems play? 2. How do you determine relevance regarding any of these factors? SIMULTANEOUS REVOLUTIONS NEW COMPETITORS NEW RULES OF COMPETITION INDUSTRY STRUCTURE CHANGES NEW POLITICAL AGENDAS THE BUSINESS NEW REGULATORY ENVIRONMENT EVER INCREASING CUSTOMER EXPECTATIONS NEW TECHNOLOGIES NEW EMPLOYEES AND NEW VALUES Figure 1-2 New Competitors • Global defines the competitive landscape. • Aircraft and communication technologies are shrinking the economic world. • English has become the international language. • There are very few countries that are not global players. • Standardization of industrial and consumer products. • Breakdown in industry boundaries is also resulting in new domestic competitors. • Technology versus physical competition via the Internet. New Rules of Competition • Speed has become a major success factor including time to market, time to decisions and response time to customers. • Distribution has become a key competitive strategy. • Productivity defines competitive positioning. • Assets can become a liability. • Quality as a competitive factor is a given. • All business functions must contribute value to customers. • Need to focus on core processes and outsource the rest. • Success is a combination of leadership and empowerment. • When timely to do so, reinvent the business. Industry Structure Changes • The US has led the way, but the rest of the world is also deregulating industries and/or privatizing government owned businesses. • Freedom from government imposed laws and/or controls frequently leads to industry structure change. • IT has prompted industry change because of the direct access aspects of the Internet. • Open competition over time results in industry change based on changing rules of competition. New Regulatory Environment • One could conclude that there is a definite trend towards deregulation of industries. In some cases this can be misleading. • Highly visible industries tend to be directly or indirectly “regulated” in some form. • As long as there are politicians there will be new laws and/or regulations that can directly impact specific industries. • Business managers prefer to compete openly despite a perception of the benefits of having a protected market. Increasing Customer Expectations Is there such a thing as a customer that would be happier with a more costly, lower quality product or service? The better you do in servicing your customer, the more they will want (and expect)! Time constraints and pressures on customers also prompts an increase in their expectations since they often do not have the time or inclination to find alternative sources. On the other hand, the global economy offers more options and alternative sources. New Employees and Values Salary and benefit expectations are greatly influenced by the financial status of people while they were growing to adulthood. Different attitudes towards authority and societal issues. Surveys say that salary is not the highest priority for many employees. Meanwhile, an increasing number of people are pursuing the startup route “to get rich.” New Technologies • IT and transportation technologies have changed the world of competition and can greatly influence success or failure of a company. • The pace of technology change adds to the challenge. • New technologies often complement each other. • The impact of the Internet as a global network is huge. • Integrating IT into a rapidly changing business can be a major challenge. New Political Agenda • Importance of government role in positioning industries to compete on a global basis. • Tax policies are an important consideration. • Regional partnerships are replacing individual country roles. • Protectionism is an on-going threat. • Monetary and fiscal policies add to challenges of competing in global markets. • Political instability has not disappeared from the global economic world. SIMULTANEOUS REVOLUTIONS NEW COMPETITORS NEW RULES OF COMPETITION INDUSTRY STRUCTURE CHANGES NEW POLITICAL AGENDAS THE BUSINESS NEW REGULATORY ENVIRONMENT EVER INCREASING CUSTOMER EXPECTATIONS NEW TECHNOLOGIES NEW EMPLOYEES AND NEW VALUES Figure 1-2 Necessary to Go Global? Being an international company - selling globally, having global brands or operations in different countries -- isn't enough. Practically everyone is going global, but do they really understand what this means. Globalization Is probably one of the most overused , even misused, terms in business parlance. Traditionally, global scope was likely to be a multinational presence. A truly global company is able to capitalize on business opportunities wherever and whenever they are found. A Global Company Its influence is felt in geographic locations where it has neither physical presence or assets. The principle constraint on the global success of an organization is it’s management aim—the ability of management to point the company in the right direction. World’s Most Valuable Brands Who are the top ten companies with the world’s most valuable brands? 9 of top 10 are US companies. The list is not limited to consumer product companies. World’s Most Valuable Brands 1. Coca Cola $68.9 Billion 2. Microsoft $65.1 3. IBM $52.8 4. GE $42.4 5. Nokia $35.0 6. Intel $34.7 7. Disney $32.6 8. Ford $30.1 9. McDonald’s $25.3 10. AT&T $22.8 World’s Most Valuable Brands 11. Marboro 24. Compaq 12. Mercedes 25. Oracle 13. Citibank 32. Dell 14. Toyota 43. SAP 15. HP 49. Apple 16. Cisco Systems 53. Sun Microsystems 17. American Express 58. AOL 18. Gillette 76. Amazon.com 19. Merrill Lynch 100. Beneton 20. Sony www.interbrand.com Globalization Globalization deals not with the mechanics of making links with diverse locations but with dedicating organizational resources to continuously monitoring and taking advantage of opportunities that emerge throughout the world. Globalization Checklist 1. Make yourself at home in all three of the world’s most important markets: North America, Europe and Asia and keep your eye on Latin America. 2. Develop new products for the entire world. 3. Replace profit centers based on countries and regions with ones based on product lines. 4. Make global decisions on strategic questions involving products, capital and research but let local units decide tactical questions like packaging, marketing and advertising. Globalization Checklist 5. Overcome parochial attitudes and train people to think and act internationally. 6. Open senior executive ranks to foreign employees. 7. Do whatever is best even if people at home lose jobs or responsibilities. 8. In markets that you cannot effectively penetrate on your own, find allies. Daimler-Benz Globalization Jürgen Schrempp, Chief Executive of Daimler-Benz: • For Daimler-Benz globalization is not an optional strategy. It is the only one. • By the year 2010 we want to be number one or two in each of our business areas. • We are the world leader in commercial vehicles, number one in rail systems through Adtranz and number two in aircraft through Airbus. • We want to double our revenue and be in the top quartile of global companies in performance. Globalization Plan 1. Be in the growth markets around the world with the right products and the right services in the right places. 2. Be a leader in innovation. Only companies which anticipate people's needs, translate great ideas into products and services, and get them into the market fast, will succeed. 3. Be exciting and rewarding for our people. Globalization creates jobs both in other countries and in the home market. For every three jobs created abroad, one is created in Germany. Globalization Plan 4. Have the right corporate culture. To be a successful global company requires exceptional executives - people who have industrial skills, but can also adapt to local communities and respond to their needs. 5. Access to global capital. That means listing on the leading stock markets. It also means presenting your financial accounts to the standards of the transparency demanded by investors. But most of all, globalization is about creating value for people. Producing products they want, creating interesting jobs, and delivering excellent returns for shareholders. Barriers to a Global Economy Africa is a lost continent. Latin America is sliding into terminal poverty. Their people can only look forward to migrating from place to place looking for hope. They will redefine hope in fundamentally different ways--a world war of terrorism that can rip the fabric of complex systems. Jacques Attali Former head of European Bank for Reconstruction and Development Business Drivers Market Technology Employees/ Work Regulation Organization Business Processes Solutions to Business Requirements Figure 1-3 Business Environment It has become more difficult to describe a business environment that applies to everyone. Historically an environment that was conducive to success within a specific industry was good for every company in the industry. Today, the companies within a specific industry can have a wide range of different performances and results. For Instance Contrast the success of Wal-Mart with the following three retailers: 1. Kmart 2. Montgomery Ward 3. Sears, Roebuck IT Relevance? Industries with a high information content. Industries with less information content. A Logical Goal? 1. Competing with Information Technology. 2. Using Information Systems to Compete. 3. Creating the Necessary Environment to Use Information Systems to Compete. The Information Technology Environment ERA I Data Processing ERA II End User Computing ERA III Strategic Systems Administrative Framework Primary Target Justification/ Purpose Regulated Monopoly Organizational Productivity/ Efficiency Free Market Individual Effectiveness Regulated Free Market Business Processes Competitive Advantage Source: Cash, McFarlan, McKenney and Appleton, Corporate Information Systems Management, Richard D. Irwin,1992, 3/E, p. 11, adapted. Figure 1-5 How Fragile is Business Success? How much of the answer to this question is related to business leadership and strategies? How much of the answer to this question is related to information technology leadership and strategies? IT Significance If your business lives by information technology can it also die by information technology? How much of an IT dependency does a company have? How much change must they deal with in defining their business to be successful in the future? Competitive Fitness Evaluation Criteria Customer Orientation Mission and Vision Organization and Systems Planning and Intelligence Human Resources Technical Resources Marketing Operations Innovation Market Strategy Corporate Culture Performance International Strategy Source: Jean-Claude Larreche, INSEAD A Quick IS Assessment 1. How is Business? 2. Is the Information Systems Manager a Member of the Top Management Team? 3. What Percentage of the Operating Budget of the Business is for Information Systems? Examples of Successful Company Use of I/S to Compete Boeing Airplane Company Wal-Mart Stores Bissett Nursery Corp. Federal Express Charles Schwab Your quota is 5 USAA companies! L.L. Bean Progressive Corp. Best ISTC Industries Retail Industry: • L. L. Bean • Dillards Dept. Store • The Gap • Home Depot • Kmart • Men’s Wearhouse • Mervyn’s • J C Penney • Toys R Us • Wal-Mart Stores Transportation Industry: • American Airlines • American President Co. • British Airways • CSX • Delta Airlines • FedEx • Singapore Airlines • Union Pacific • United Airlines • UPS Worst ISTC Industries Construction Industry Petroleum Industry Federal Government Can the IS be right if: 1. The business climate is wrong. 2. The business strategy is wrong. 3. The business leadership is wrong. Business Strategy and IS Concepts. Relative To (Bigger Picture). Company Examples. Conclusions To logically and effectively position information systems within an organization one must begin by understanding the environment and the company itself. Then and only then can you understand the significance of the role of information systems. ATP Roadmap 1. 2. 3. 4. 5. 6. 7. Make sure that you understand the paper structure. Read the information on the Callon web page regarding the company assigned. Go to Hoover’s Online and look at the information regarding the company, its industry, its rivals and its customers. I will provide recent copies of Value Line regarding the industry and the company next Tuesday. Go to the company web page and pay particular attention to the company business and IT leaders. Look at any web links to customers. Look at the most recent annual report and read the cover letter, review the financial performance over time and understand the organization of the company from a product and customer perspective. Spend time looking at pertinent information via the Internet.