ECT 589: E-Commerce Management

1. ECT 589: E-Commerce Management Week #8 Strategic IT planning for E-Business ECT 589 Susy Chan, Ph.D.

2. Agenda • Market News • Exploiting Virtual Value Chain • IT Planning for eBusiness • Strategic Planning for Emerging Technologies • Rosetta Net and ebXML Case • Next Week: General Motor Case • Week 10: IT Architecture Design/project presentation (?) • Week 11: Final Project Presentation ECT 589 Susy Chan, Ph.D.

3. e-business strategic planning • Can we plan in a world of volatile change? • Top-down analytical planning • Takes a broad view of the business environment, identifies the company’s options and defines the firm’s mission and director • Bottom-up tactical planning • Narrower view, short term results in specific areas • Continuous planning with feedback • A mix of both approaches ECT 589 Susy Chan, Ph.D.

4. Top Down Analytical Planning • Goals – define a strategic vision to guide capital budget • Longer planning time frame (5-years plus) • Assumes the future to be a continuation of the present • Comprehensive, analytically based, data rich, rigorous • Environmental scanning, testing different scenarios, predictive analysis and modeling • Structured and hierarchical organization and decision model • Drawbacks: • Do no work well in fast-changing business conditions or disruptive change • Separation of strategy formulation (analysis) and implementation (execution) • Long decision chain, vision and strategy are not shared by the front-line staff; Not responsive to market needs ECT 589 Susy Chan, Ph.D.

5. Bottom-up Planning • Addressing immediate needs, reactive • Short term projects • Reflects a fragmented org structure • Drawbacks • Not integrated to achieve corporate-wide objectives • Fractured pattern of authority • Impedes comprehensive planning and the systems integration required for e-business • Fragmented applications (e.g., multiple ERPs, incompatible requirements for infrastructures) ECT 589 Susy Chan, Ph.D.

6. Continuous Planning with Feedback(Adaptive Planning) • Allow strategy to evolve; Dynamic interaction between planning and implementation • Shorter planning horizon and more organic process • Develop several plausible scenarios for evaluation, not one most-likely scenario • Blurring of strategies, tactics and implementation, 80% of benefits with 20 percent of efforts • Challenges: • Governance and capability (skills, data, knowledge, decision process, culture, organization structure) for technology solutions becomes a critical organization design issue • Ability to differentiate and balance strategies of long term (architecture and infrastructure) and short-term (specific applications) impacts • ROI and measurement vs, classify investment ECT 589 Susy Chan, Ph.D.

7. Systematic Reliable, cost-efficient To two years or longer Architectural standards Data facing Mission Critical Opportunistic Urgent user demands 12 weeks Process guidelines User facing Competitive Edge Adaptive Planning: Support Two Worlds Plan for transition in stages from opportunistic world to systematic world, Project candidates ECT 589 Susy Chan, Ph.D.

8. E-Business Drivers • Organizational • Consolidation, efficiency • Business • New business initiatives, mergers • Customer • Changing customer needs & priorities • Technology • New technology, use of legacy apps ECT 589 Susy Chan, Ph.D.

9. Areas of Assessment • Core Competencies (Internal) • Customer Interactions • Production and fulfillment • People • Technology • Infrastructures ECT 589 Susy Chan, Ph.D.

10. IT Adoption Profile • Type A: Leading edge adopters of technology (15%  30%) • Use technology as competitive weapons, rapid adopter • Spend 2x on IT than Type C • Application portfolios include high risk projects • Focused on sustainable competitive advantage and customer loyalty. • Type B: Mainstream adopters (65% 60%) • Wait for new technology to be broadly adopted before adoption • IT spending is in line with competitive companies. • IT investment decisions are driven by the industry trend. • Type C: Conservative adopters. (20%10%) • Risk averse • Efficiency focused • New IT investments are rigorously challenged. ECT 589 Susy Chan, Ph.D.

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13. IT Strategic Planning Process Framework Mission Goals Values Vision Rank Strategic Projects Financial Review Enterprise Technology Strategy Status competition Technology Criteria for Selection Risk Review IT strategic Plan (resource Allocation) Business Strategy Resources Available Scoring & Evaluation Business Impact Review IT Architecture IT Strategy: Alternatives Initiative Selection Selection & Performance Measures Portfolio Management Source: Gartner ECT 589 Susy Chan, Ph.D.

14. Value Portfolio Analysis: Application Categories Utility Frontier Enhancement High Cost (Expense Focus) Productivity (Payback) Focus Opportunity (Advantage) Focus E-Commerce Customer Tracking Supply Chain Management Business Creation Contribution To corporate Performance Customer Service Process Redesign Order Entry User Empowerment Billing Functional Enhancement General Ledger Payroll Utility Function Low Dominant Occasional Seldom Relative Share Portfolio ECT 589 Susy Chan, Ph.D.

15. Emerging Technology Planning • Early adoption of emerging technologies for competitive advantages • Manage emerging technologies • Identify strategic opportunities that combine technology “push” with business “pull”. • Prioritize options for major impacts • Coordinate all related activities to build on successes and avoid redundancies. • Educate staff to become skilled in the risk management with introducing new technologies. • Carried out by Advanced technology group (ATGs) • A group with the mission of performing strategic IT planning in support of a company’s business goals. Global Healthcare Exchange (continue) • Technology aggressiveness • 30% Type A • 60% Type B • !0% Type C ECT 589 Susy Chan, Ph.D.

16. Who does strategic IT planning? ECT 589 Susy Chan, Ph.D.

17. Emerging Technology Planning Process • Define scope and align with the business. • Scan and track technology opportunities. • Rank and select the subset of technologies and initiatives. • Evaluate technology initiatives and determine course of actions. • Influence the organization for adoption through marketing, education, and networking. • Transfer knowledge and responsibility for implementation. ECT 589 Susy Chan, Ph.D.

18. Focus and Scope: Aligning with the Business • Alignment is a two-way flow: technologies vs. business • Three approaches • Top down: strategic planning • Bottom up: business unit request • Out of the box: visioning and scenarios • Different roles for ATG members ECT 589 Susy Chan, Ph.D.

19. Hype Cycle for Emerging Technologies ‘04 ECT 589 Susy Chan, Ph.D.

20. Creating an e-Business IT Vision • Move from technology discovery to business value definition. • Focus on the fundamentals: • The basic economic model of the firm • The strategic intent of the firm • The strategic endeavors of the firm and its individual units • Ask questions to clarify these issues • Create a business needs matrix ECT 589 Susy Chan, Ph.D.

21. Business Needs Matrix ECT 589 Susy Chan, Ph.D.

22. Business Needs Matrix -- RFID • Description • Automated data collection technology that enables equipment to read and write to identification tags without contact or line of sight • Impact on Customers • Enhances customer interactions and customer service by enabling inventory assessment without manual intervention; increases revenue by increasing stock availability • Impact on Capital • Reduces capital requirements as asset tracking and logistics improvements increase utilization and reduce the amount of inventory required to service customers • Impact on Resources • Reduces efforts to manage inventory and assets and reduces required inventory levels to serve customers • Impact on Cycle Time • Reduces time and effort to track and trace inventory and other assets; improves replenishment, maintenance, and support cycle times ECT 589 Susy Chan, Ph.D.

23. Business Needs Matrix – Web Services • Description • Application interfaces accessible via Internet standards used for lightweight integration across devices, systems, and locations • Impact on Customers • Increases the availability of data and application services to customers in a flexible manner • Impact on Capital • Reduces capital demands for technology by increasing reuse and broader use of existing systems and information • Impact on Resources • Increases reuse and application of existing systems and business rules, reducing the need for additional applications • Impact on Cycle Time • Accelerates the introduction of new products and services by shortening application development and deployment time. ECT 589 Susy Chan, Ph.D.

24. Business Needs Matrix – Wireless • Description • Technology supporting point-to-point and point-to-multipoint device networked communications without a physical connection to the network • Impact on Customers • Extends company ability to reach customers at their point and place of need • Impact on Capital • Improves capital asset flexibility as assets can be reallocated without requiring a change to the physical or technical infrastructure • Impact on Resources • Decreases resource requirements as field service and other assets can be dynamically rescheduled and reallocated; Increases need for support and management Impact on Cycle Time • Accelerates cycle time as it decreases the delays between data/decision capture and business response ECT 589 Susy Chan, Ph.D.

25. IS Stakeholders and the Business Ecosystem Larger BusinessEcosystem Core Business Government agencies and other regulatory organizations, investorsand owners, trade associations, standards bodies, unions Joint Ventures Business Partners Suppliersof mysuppliers Customers of my customers DistributionChannels DirectSuppliers Core Contributors Direct Customers Competing organizations having shared product And service attributes, processes, and Organizational arrangements Extended Enterprise ECT 589 Susy Chan, Ph.D.

26. Scan and Track Technologies • Technology Scan • Analyst companies, consultants, vendor presentations, government and university labs, trade press, conferences, networking • Organize the discovery process by information sources, application areas, or technology areas • Technology Profiles • Name and definition of technology, business application, benefit to company, potential business champion, activity to be leveraged, competitors’ adoption, level of maturity, level of risks, approximate costs • Emerging Technology Portfolio • The set of technology profiles representing candidate IT and technology –led initiatives the company has not yet adopted or fully exploited. ECT 589 Susy Chan, Ph.D.

27. Rank: Make the Prioritization Explicit • Select the subset of technologies, initiatives and project ideas that look most likely to bring significant benefit to the company. • Balancing resources for: • Supporting business unit and management requests • Identifying and driving forward strategic technologies ahead of business unit requests. • Technology radar screen (maturity, disruption, and benefits) • Technology scoreboards (benefits vs. cost & risk factors • Technology hype cycle: timing the adoption opportunities ECT 589 Susy Chan, Ph.D.

28. Technology Radar Screen Also consider: Level of disruption ECT 589 Susy Chan, Ph.D.

29. Evaluate and Decision • IT project planning components • Detailed work breakdown, milestones, staffing, timeline, cost, deliverables, evaluation goals and criteria • Focus on specific application of the technology. Identify a business champion • Risk factors, and ROI • Technology process failure, disruption of architecture or processes, lack of management support, nonadoption or resistance by users, benefits not achieved, lack of maintainability, rate of obsolescence, lock in risks, regulatory environment, social acceptance and new business models • Prototypes • Pilots ECT 589 Susy Chan, Ph.D.

30. Prototypes and Pilots • Prototypes • A risk reduction tool to investigate areas of high technical uncertainty; also a marketing tool to increase internal awareness of a technology’s potential. • Pilots • For investigating the impact of the technology in the operational environment and to evaluate the usability and effectiveness of the pilot system with a small number of users, prior to a wider introduction. • Making the decision • Proceed; Revisit the evaluation, wait till technology matures further; remove the technology from the portfolio ECT 589 Susy Chan, Ph.D.

31. Evangelize: Marketing, education, and networking • Marketing: Making others aware of the role and capabilities of the ATG (as a resource) and selling the value of specific technology and application opportunities (showcase the technology in a business context). • Networking • Education • “evangelism” • Overcoming organizational resistance • Create a sense of ownership • Seed the technology among interested users • Create a separate center of excellence. • Mandate adoption among relevant classes of users. ECT 589 Susy Chan, Ph.D.

32. Technology Transfer • Transferring knowledge through people • Bringing in staff • Sending out staff temporarily • Sending out staff permanently • Rotating staff • Transferring across the business • Consulting to operational development ECT 589 Susy Chan, Ph.D.

33. Starting and Managing an ATG • Mission: to exploit emerging technologies to develop and maintain the company’s competitive position • Reporting and governance • Relationship with architecture group • Funding the ATG • About 2% of IT spending ECT 589 Susy Chan, Ph.D.

34. Emerging Technology Budget as a Percentage of Revenue and IT Budget, by Company Size ECT 589 Susy Chan, Ph.D.