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Week 4 Monday, September 19

Week 4 Monday, September 19. IT Leadership Strategic IT e-Business Model IT Planning. IT Leadership. Role of CIO… Changes with advances in IT that open new opportunities Determined by the business' vision, mission and strategic plan to capitalize on opportunities

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Week 4 Monday, September 19

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  1. Week 4Monday, September 19 IT Leadership Strategic IT e-Business Model IT Planning

  2. IT Leadership • Role of CIO… • Changes with advances in IT that open new opportunities • Determined by the business' vision, mission and strategic plan to capitalize on opportunities • Shaped by the business plan to capture opportunities • Specified by the adoption and the business' expectations of IT

  3. American Airlines and SABRE:Leveraging IT for a Competitive Advantage

  4. American Airlines and SABRE:Summary • Accurate passenger inventories allowed American to manage under/overbookings to jointly optimize passenger service and capacity utilization levels • Reduced labor content in the reservations process while increasing the productivity of the remaining reservation personnel (efficiency) • Increased their presence in current markets • Increased their presence in markets not served

  5. American AirlinesIT and Electronic Commerce • Level 0 - No automation between the organization and its external entities (internal operations control) • Level 1 - Telecommunication link between the organization and its customers (data sharing) • Level 2 - Telecommunication links between the organization, and its customers and suppliers (process and information integration) • Level 3 - Strategic alliances formed with competitors to offer products and services to customers (electronic market facilitation)

  6. American Airlines and SABRE Level 0 Level 1: Retail Automation Travel agents and corporate offices Level 2: Co-hosting Travel agents and corporate offices

  7. American Airlines and SABRE Level 3: Strategic Alliances Co-host Travel agents, corporate offices, public Codeshare Alliances Codeshare Alliances

  8. American Airlines Codeshare Alliances AA Codeshare Alliances A codeshare is an agreement where American Airlines purchases seats on selected routes and markets them as an American Airline flight. Codeshare alliances allow American to offer our customers access to hundreds of international and domestic U.S. destinations, while ensuring consistent, coordinated, and high quality passenger service.

  9. Horizontal Integration

  10. Star Alliance

  11. Star Alliance "One-stop" shopping Star Alliance members

  12. Star Alliance

  13. United and Customer Loyalty

  14. Star Alliance Loyalty Benefits

  15. Star Alliance Loyalty Benefits

  16. B2B and Supply Chain • Coordinating suppliers • From EDI (electronic data interchange) to the Internet • Establishing close and tight relationships • Loose integration – ad hoc and occasional • Close integration – formal exchange of information between two businesses • Tight integration – sharing a business processes (e.g., UPS) • Becoming a customer-centric value chain (virtual enterprise) • Risk sharing • Supply chain (suppliers) vs. demand chain (distributors and retailers)

  17. Boeing Aircraft and Suppliers:Assembling an Aircraft Boeing 787 Risk sharing partners

  18. Boeing and Primary Vendors

  19. Vertical Integration Consumer Retailer (Distributor) Supplier (manufacturer)

  20. B2C and Vertical Integration: United.com Air Transportation  Car Rental  Hotel

  21. B2C and Self-Service: Travelocity.com Customer specifies origin, destination and dates Travelocity finds and presents airfare alternatives

  22. B2B: Vision Service Plan VSP, doctors and patients

  23. Strategic IT Planning • Alignment of the IT strategy to the business strategy • Continuous planning vs. periodic planning • IT portfolio vs. projects (6 months maximum) • Robust IT infrastructure • Enterprise planning • Continuous improvement and reengineering • Top-down vs. bottom-up, centralized vs. decentralized Rapid advances in IT

  24. Longer tongue Longer bill Counterbalance weight Strengthened neck Larger wings Strengthen legs Ad Hoc Planning Volume increases by its cube (v3), area by its square (a2) Duck Tongues: A Tale of Redesigning the Duck

  25. Store Store Traditional ‘Bricks and Mortar’ Business Model Corporate Headquarter Suppliers Retail Store Distribution Center Store Manufacturer Consumer Retail Store Retail Store

  26. E-Business:An IT-Enabled Business Model • Business model represents a • “Clearly stated plan for adding economic value by applying know-how to a set of resources in order to create a marketable product or service” (Miles, Snow and Miles, 2000) • E-Business, an IT-enabled business model • Electronic network-based (Internet) • Information primary resource

  27. Transitioning to e-BusinessMIT90 Framework Structure Vision Management Processes Strategy Technology Individuals & Roles Changes to one component require compensatory (or retaliatory) changes to the others

  28. Traditional Business ModelOrganization Structure Hierarchical Communication Flows Organization Silos Functional Area Functional Area Functional Area Each functional area’s performance tends to be optimized within itself

  29. Paradigm Shift Defines the way problems and solutions are viewed and developed Traditional Business Models e-Business Models Physical Resource Management Information Management Paradigm shift • Efficiency • Logistics • Physical presence • Exploitation and leveraging of information and knowledge (factual, procedural, tacit) • Virtual organizations (partnerships and alliances) • Internet-enabling technologies

  30. e-Business ModelOrganization Structure Organizational boundaries less discernible Organization Direction and vision Functional Area Functional Area Functional Area Shared knowledge The entire organization’s performance is optimized

  31. e-Business Transition Model Structure Technology Successful E-Business Model Management Processes Strategy Individuals and Roles Strategy incorporates a vision of technology

  32. Strategy and Organization Structure • Responding to the environment • Opportunities • Threats Create a responsive organization structure "If you have to react, it's too late"

  33. Planning Techniques • Stages of Growth: Nolan's Stages Theory • Rockart's Critical Success Factors (CSF) • Porter's Competitive Forces Model • Porter's Value Chain Analysis • e-Business value matrix • Linkage analysis planning • Scenario planning

  34. Nolan's Stage Theory • All organizations go through four stages for IT adoption • Introduction • Contagion • Control • Integration IT is recognized as a resource

  35. Nolan's Stages Theory Investment in IT IT Resource Integration Control Contagion Introduction Time Stage 1 Stage 2 Stage 3 Stage 4

  36. Critical Success Factors (CSF) • “Critical success factors thus are, for any business, the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where 'things must go right' for the business to flourish. If results in these areas are not adequate, the organization's efforts for the period will be less than desired. ... As a result, the critical success factors are areas of activity that should receive constant and careful attention from management.”Rockart, 1979

  37. Prime Sources of CSFs • Industry • Determined by the characteristics of the industry • Competitive strategy and industry position • Actions of each organization within the scope of this industry • Environmental factors • Environmental events that affect the industry and organization (e.g., the economy)

  38. Prime Sources of CSFs • Temporal factors • Internal considerations • Activities significant for the success of an organization for a particular period of time because they are below the threshold of acceptability at that time • Managerial position • Functions and responsibilities of each managerBullen and Rockart, 1981

  39. Classification of CSFs: Three Dimensions • Internal versus External • Internal: Deal with issues and situations within the manager's control • External: Pertain to situations generally less under the manager's control • Monitoring versus Building • Monitoring: Focuses on tracking and guiding the organization's performance (i.e., control) • Building: Aimed at adapting the organization to a perceived new environment (i.e., planning) • Sources of CSFs

  40. Five Sources of CSFs • Industry • Strategy • Environment • Temporal • Position (of manager)

  41. Major Dimensions of CSFs • Sources • Industry • Strategy • Environment • Temporal • Position Interest rates New skill acquisition Building (Innovation) Monitoring (Control) External Internal

  42. Benefits of CSF Approach • Helps managers determine on which factors they should focus their attention • Ensures those factors will receive careful and continuous management scrutiny • Forces managers to develop good measure for those factors and to seek reports on each of the measures • All a clear definition of the amount of information that must be collected by the organization and limits the costly collection of more data than necessary • Moves the organization away from the trap of building its reporting and information system primarily around data that are easy to collect.

  43. Benefits of CSF Approach (Cont.) • Acknowledges that some factors are temporal and that CSFs are manager specific • This suggests that the information system should be in constant flux with new reports being developed as needed to accommodate changes in the organization’s strategy, environment, or organization structure Rockart, 1979

  44. Hierarchical Nature of CSFs Industry CSFs Corporate CSFs Sub-organization CSFs Individual CSFs

  45. Porter’s Five Forces ModelForces that Shape Strategy  How will the business react to threats (and opportunities)? Potential Entrants Threat of new entrants Industry Competitors Bargaining power of suppliers Bargaining power of buyers Customers and Buyers Suppliers    Rivalry among existing firms Threat of substitute products or services  Substitutes

  46. Porter’s Five Forces Model  Potential Entrants Threat of new entrants Industry Competitors The strategy and actions an organization adopts depend upon its perceptions of itself and these threats. Bargaining power of suppliers Bargaining power of buyers Customers and Buyers Suppliers • Porter’s strategies: • Product differentiation (non-duplicable product or service) • Low-cost producer • Market niche (market segment or geographical market)    Rivalry among existing firms Threat of substitute products or services  Substitutes

  47. Value Chain Analysis • Primary activities • Inbound logistics • Operations: converting inputs to outputs • Outbound logistics • Marketing and sales • Service • Supporting activities • Organization infrastructure • HR management • Technology development • Procurement Getting the product or service to the customer Enabling the value chain

  48. Value Chain Analysis Firm infrastructure Support Activities Human resource management Margin Technology development Procurement Customers Inbound logistics Outbound logistics Marketing and sales Operations Service Margin Primary Activities How can value be added at every activity?

  49. e-Business Value Matrix • Project categories: • New fundamentals • Operational excellence • Rational experimentation • Breakthrough strategy • Value of the project (low, high) • Criticality to business • Newness of idea

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