Whats Happening?!

Job creation incentive program seems to have backfired

financially on the state of California.
Three California congressmen are questioning the sale of
IBMs PC manufacturing to a China company based on
national defense concerns.

SBC is negotiating to buy AT&T for $16 billion.

Whats Happening?!
Knight-Ridder advertising revenue for 2004 was $648
million. Newspaper revenue was $747 million. Online media
revenue was $31 million.

Oracle expects higher profits. Seeks closer ties with IBM.

New university Cal State East Bay.

Chapter 6 Summary

Business Vision

Chapter Objectives

Positioning vision as the starting point in

directing, posturing and running a business.

Understanding the significance of the vision

process.

Remembering that vision triggers the entire

business and information technology
management process.

What is a Vision?

A photograph of the future

It must be realistic and credible -- and most certainly

attractive to the organization

Concrete and easily understood ideas about the longrange future of the business

What Must Be Accomplished

Establish a clear vision of the future.
Provide a basis for sharing values and views.
Send a message regarding the importance of the
vision process throughout the entire organization
to gain consensus and momentum.
Make things happen! Action needs to become a
high priority.

The Vision to Action

Process

Implementation
(Action)
Agreement &
Commitment

Tactics and
Business Plan
Strategy
Feedback
Vision
Sensing
Opportunity

Vision Uncertainty

The dynamics of the market

Rapidly changing technologies

The logic and need to address changing employee

values and traditional methods

The shift from old regulatory practices to new

practices in many industries

Customer Service

Frequently Drives the Vision!

For USAA, General McDermotts four step

process:

Automation
Lower employee attrition
Improve job training
Decentralize decision making by empowering
employees

USAA
Role and significance of IT?

An executive partnership
Technology experimentation and assimilation
Leveraging of information systems
Strategic architecture
Horizontal integration of applications.

Whirlpool
Decided that it would become the global leader in
the large appliance industry.
Initially identified product technology and
procurement as key factors to realize this goal.
Added information systems as an essential third
factor to achieve this goal.

Conclusions
Successful companies are the result of good
leadership.
Talented leadership is demonstrated in the following
forms:
Determining the direction of the business.
Promoting the need for action.
Fostering an environment for well directed
information systems.

Possible Exam Questions

1.

What factors influence the creation of a

vision?

2.

What impact does a vision have on

information systems?

Chapter 7 Introduction
Implementing a Vision:

Strategy, Tactics and Business Plan

Chapter Objectives
1.

Provide an understanding of how to transition a vision into

reality through strategy, tactics, and business plans.

2.

Better appreciate how strategies should dictate the role and

significance of information systems.

3.

Understand challenges that a company faces in

formulating appropriate strategies.

Chapter 7 In Just One Slide!

The Four Components of Possible Business Success

Vision: What the company wants to look like in the future.

Strategy: Ideas on how to accomplish the vision, by doing

an external and internal analysis of the company.

Tactics: The specific, time-oriented method of

implementing the decided strategies.

Business Plan: The plan for allocating company resources.

(aka: Operating Plan or Budget)

Elements of a Business Strategy

Competitive framework: What market are you in? How

big is it? Who are your competitors, and what are their
strategies?

Market target: What type of customer are you selling to?

What are their needs, attitudes, and priorities?

Basis for perceived competitive superiority: How do your

customers define your product or service as superior?

Key profit drivers: What makes your product or service

profitable?

Product portfolio: Interrelating a product or service with

the above four points.

Business Strategy Challenges

Is the strategy consistent with our vision?

Is the scope of strategy right?
Is there are logical balance between short term and
long term objectives?
How does this compare to the industry leader?
How aggressive should the strategy be
implemented?
Do people skills exist and are they availability?
Are capital and operating funds available?

Strategic Management Process

Environmental Analysis
General Environment

External
Analysis

Company
Vision

Operating Environment
Competitive Positioning

s
tie
i
n
tu ts
r
po rea
p
O Th

Directions for Development

Company
Strategic
History

Current
Strategy

Stakeholder
Analysis
Vision &
Strategy

Chosen
Strategy

Realized
Strategy

Company Analysis
Structure

Internal
Analysis
Figure 7-2

Values/Culture
Skills
Resources

s
th
s
g
n
se
s
rt e
e
S
kn
a
e
W

Reprinted with permission from

The Strategic Management Blueprint
Cambridge, Ma: Blackwell, 1993.

Example: Progressive Corporation

Vision:
Reduce the economic cost and human trauma of automobile
accidents and provide services that delight consumers.
Plan of Action:
Make major changes to the definition of their business and
financial objectives.
Align core business strategies based on these changes.

Strategy Implementation
Senior Management

Vision
and Macro
Strategies

Business Uncertainties

Empowered Implementers
Company Culture
Risks to be Avoided
Critical Performance
Factors

Micro
Strategies
and
Tactics

Key Enterprise
Business Processes
Figure 7-3

Business Plan
The most straight-forward part of the entire process.
Deals with allocation of funds, people and other
resources.

IT Based Strategies
MARKET PLACE

OPERATIONS

SIGNIFICANT
STRUCTURAL
CHANGE

Federal Express
USA Today
Charles Schwab

Whirlpool
Xerox

TRADITIONAL
PRODUCTS
AND PROCESSES

USAA
L.L. Bean
McKesson

BancOne
Boeing
Frito-Lay
Wal-Mart

Figure 7-6

Plan for Action!

As has been emphasized: the point of all of this is to
make things happen. Key to such an effort:

Simple Strategy

Aggressive Implementation

Conclusions

Business strategies can frequently work without

information systems support.

IS support can be a key enabler of a successful business

strategy.

IS implementations wont contribute to the success of the

company unless the right strategies are in place.

In the current business environment, identifying and

implementing the best possible strategies often faces major
challenges.

Chapter 7
Implementing a Vision:
Strategy, Tactics and
Business Plan

If we know where we are and something

about how we got there, we might see where
we are trending--and if the outcomes which
lie naturally in our course are unacceptable,
to make timely changes.
Abraham Lincoln
President of the United States

Primary Business Challenges

Deciding what things are worth
doing.
Getting things done!

If the strategy is a hammer, the tactic is

a nail. The actual end results are
accomplished by the nail. If the nail
isn't hammered correctly then the battle
is lost. Sometimes the hammer also
misses the nail.

Be Careful

Do not confuse strategies with vision.

It can be relatively easy to come up with a vision.

The challenge is to turn it into reality through

appropriate strategies and tactics.

Global Management
Managers must be prepared to engage in heightened
international competition and have the ability to:
1.
2.
3.
4.
5.

Manage organizations in different cultural settings.

Establish a value system within the organization.
Market products in different countries.
Adapt to changing markets.
Develop appropriate strategies dealing with finance,
accounting, manufacturing, marketing and management
of the organization.

Defining the Process Elements

Vision: Identifies what the organization wants to

look like at some logical point in the future.
Strategy: How a company will achieve the longterm goal of the vision.
Tactics: More specific time-oriented, measurable
ways to make a vision a reality.
Business Plan: Allocation of funds and other
resources.

When in Doubt
Whether dealing with vision, strategies or tactic
think customer!
Remember that a major difference between
companies is how they treat their customers.
Also the importance of doing necessary
homework on competitors.

Porter Strategy Guidelines

Primary Strategies:
1. Differentiation
2. Least Cost

Supporting Strategies:
1. Innovation

2. Growth
3. Alliances

Business Strategy Model

Guidelines
1. What products and/or services do we intend to offer?
2. What price range of products do we intend to offer?
2. What customer targets do we intend to pursue?

3. What geographic markets do we intend to address?

4. How will we obtain products to sell to our customers?
5. How will we deal with sales to our customers?

6. What company structure do we intend to create?

7. What information systems approach will we take?

Important Strategy Options

Focus versus breadth:
Regional, national and/or selectively global
Products
Services
Markets
Business processes
Business partners
Innovation
Cost
Speed to market

Focus Challenges

The grass is always greener.

Failure to see important changes in markets or

product areas.

The constant need for revenue and profit growth.

The difficulty in self-renewal of the base business.

Great Focused Companies

Southwest Airlines

Wal-Mart Stores

Dell

More Strategy Challenges

One of the most difficult things in developing appropriate

strategies is competitive analysis.
Good companies develop strategies that are believable,
executable and achievable.
Good strategies spell out multi-year plans: the market
segments to be pursued, market share numbers that
must be achieved, expense levels that must be managed and
resources that must be applied.
These must be reviewed regularly and become the driving
force behind everything that the company does.

Base for Execution

Strategic clarity.

High performance culture.

World-class processes.

Strategy Clarity
Clearly communicated understanding of this is based on the
vision for the company.
Here are the core business strategies and this is how you
should carry out your job.
Superb execution is more about values and commitments.
Successful execution comes from belief and conviction and
not from procedures.

Business Strategies!?
How important are they, really?

Do business strategies really make a difference

between success and failure of a company?

Need to ask the following

questions:
1. What is driving competition in our industry or
one that we might enter?
2. What actions are competitors likely to take and
what is the best way to respond?
3. How will our industry evolve over time?
4. How can we be best positioned to compete in
the long run?

Strategy Consistency?
1. Internal Factors
2. Resource Factors
3. Environment Factors
4. Communication and Implementation
Considerations

Strategy Consistency?
Internal Factors:

Are the goals achievable?

Do key operating policies address the goals?
Do key operating policies reinforce each other?
Resource Factors:
Do the goals and policies match the resources available to
the company relative to competitors?
Does the timing of the goals and policies reflect the
companys ability to change?

Strategy Consistency?
Environment Factors:
Do the goals and policies exploit industry opportunities?
Do the goals and policies deal with industry threats that are
possible with available resources?
Does the timing of the goals and policies reflect the ability of
the environment to absorb the planned impact.
Are the goals and policies consistent with societal concerns?

Strategy Consistency?
Communication and Implementation Considerations:
Are the goals understood by the implementers?
Is there congruence between the goals and policies and the
values of the implementers to insure commitment?
Is there sufficient management capability and availability to
assure effective implementation?

Competitive Strategy Process

A. What is the company doing now?

Current strategy?
Assumptions about the companys relative
position, strengths and weaknesses, competitors
and industry trends.

Competitive Strategy Process

B. What is happening in the business environment (industry).
Validity of industry opportunities and significance of
threats.
Key factors for competitive success.
Capabilities and limitations of existing and potential
competitors.
Company strengths and weaknesses relative to
present and future competitors?

Competitive Strategy Process

C. What should the company do?
Test the assumptions and strategy.
Consider alternative strategies.
Chose the strategy that best relates to the
companys situation relative to external
opportunities and threats.

IEA
Internal
External
Action

Progressive Corporation
1988 Performance

Record Revenue
Record Earnings
Outstanding Company Culture
Highly Respected Business Leader
Well Regarded Company
Could Things Possibly Be Better?

Progressive Corporation
1989 Impact
Voters Passed Proposition 103 in
California Resulting in $52 Million
Being Put into an Escrow Account.
Allstate Gained a Larger Market
Share in Progressives Niche
Market for the First Time.

Progressive Corp. Business

Progressive decided that it was really
in the business of reducing human
trauma and economic costs of auto
accidents.

Progressive Corp. Vision

We seek to be an excellent, innovative,
growing and enduring business by reducing
the human trauma and economic costs of
auto accidents in cost-effective and profitable
ways that delight customers.

Progressives New Business Strategies

A New Definition of the Business.

Establish Lower Profit Margin Objectives.
Pursue a Broader Auto Insurance Market.
Provide Consumer Access to Policy Rates.
Provide Policy Information to Customers.
Guarantee Policy Renewal.
Utilize Multiple Distribution Channels.
Promote Company Identity.

Progressives New Business Strategies

Curtail Diversification.
Reduce Operating Expenses.
Assign Business Process Ownership.
Establish a New Employee Compensation
System.

IS Support of New Strategies

Express Quote Service.

Immediate Response System.

Vision, Customer Value

Proposition, Core Values and
Objectives
Progressive Vision:
We seek to be an excellent, innovative, growing and enduring
business by cost effectively and profitably reducing the human
trauma and economic costs of auto accidents and other
mishaps, and by building a recognized, trusted, admired,
business generating brand.
We seek to earn a superior return on equity and to provide a
positive environment which attracts quality people who
develop and achieve growth plans.

Progressive
Customer Value Proposition:

Our customer value proposition provides a litmus test for

customer interaction, relationships and innovation.
Fast, Fair, Better
Thats what you can expect from Progressive. Everything we
do recognizes the needs of busy customers who are costconscious, increasingly savvy about insurance and ready for
easy, new ways to quote, buy and manage their policies,
including claims service that respects their time and reduces
the trauma and inconvenience of loss.

Progressive
Core Values:

Progressives core values are pragmatic statements of

what works best for us in the real world.
They govern our decisions and behavior.

We want them to be understood and embraced by all

Progressive people.
Growth and change provide a new perspective, requiring
regular refinement of core values.

Progressive Core Values

Integrity We revere honesty. We adhere to high ethical
standards, report precisely and completely, encourage
disclosing bad news and welcome disagreement.
Golden Rule We respect all people, value the differences
among them and cope with them in the way we want to be
dealt with. This requires us to know ourselves and to try to
understand others.

Objectives We strive to communicate clearly Progressives

ambitious objectives and our peoples personal and team
objectives. We evaluate performance against all these
objectives.

Progressive Core Values

Excellence We strive constantly to improve in order to meet
and exceed the highest expectations of our customers,
shareholders and people. We teach and encourage our
people to improve performance and to reduce the costs of
what we do for customers. We base our rewards on results
and promote on ability.
Profit The opportunity to earn a profit is how the competitive
free-enterprise system motivates investment to enhance human
health and happiness. Expanded profits reflects our
customers and claimants increasingly positive view of
Progressive.

Peter Lewis
Currently Chairman of the Board
We sell speed, not insurance.
Glenn Renwick, President and Chief Executive
Officer
Raymond Voelker, Chief Information Officer

IS Exec Identity Crisis

My world collapsed recently during a strategic planning
meeting between the information systems organization and
our marketing department.
How can we in IS help you to realize your goals? asked the
IS Director. This seemed like a good open-ended question,
and I was waiting for the vice-president of marketing to
embrace IS in his confidence. We were prepared to act as a
full business partner with the marketing department.
Beyond capacity planning for your computers, I dont know
how you can help. Im not even sure what your role is in all of
this replied the VP of Marketing.

Information Technology Impact

Information
Technology
Information

People

Work

Organization

Information Technology Impact

Semi-automated batch
system (out-dated)

Information
Technology
Information
10 day
information
float

People

Route Salesman

Increased
complexity for
route
salesman and
plants

Work

Organization
Regional
Competitors

Information Technology Impact

Communications Network
and Hand-held Computer

Information
Technology
Information
Reduced
information
float to 24
hours

People
Route Salesman
Account Specialist
Merchandiser

Increased
complexity for
route
salesman and
plants

Work

Organization
Decentralized Marketing
Organization

Yum! Brands
KFC

Pizza Hut
Taco Bell
Long John Silver
All American Food
(A&W)
Created as Tricon Global Restaurants on October 6,
1997 as a spin off from Pepsi.

Yum! Brands
The worlds largest quick service restaurant
company with more than 33,000 units in more
than 100 countries involving 840,000
employees.
36% are outside the US

Worldwide Units - 2003

Dairy Queen
Domino's Pizza
Wendy's
Burger King
Subway
McDonalds
Yum
0

5000 10000 15000 20000 25000 30000 35000

Long Term Goals

1. To be the premier global restaurant company.
2. Transform the Quick Service Restaurant
industry with multi-branding.
3. Become the best restaurant company
investment.

Business Strategies
1. Drive International Growth
2. Multi-brand Great Brands

3. Improve Operations of Brand Portfolio with

Customer Mania

International Growth
In 1992 McDonalds had 4,000 international restaurants.
Today it has over 16,000 with a $1 billion profit from
these operations.
Yum! has 11,800 (6,800 KRC and 4,400 Pizza Hut) with
nearly $400 million in international profit.
Burger King is third with a profit of $50 million.

International Sales
Great China
Americas
Europe, South Africa
Asia-Pacific
0%

10%

20%

30%

40%

50%

International Growth Focus

Seven countries but China, UK, Mexico and Korea
will receive most of the capital investment with an
objective of opening 1,000+ new international units.
China currently has 800 KFCs and 100 Pizza Huts with
plans to open 200 new units per year.

65% of this growth will be through joint venture

partners and franchises.

International Challenges
1. Customer food preference and taste.
2. Standard of livingproduct cost.
3. Currency fluctuations.

4. Brand strength and unit consistency.

5. Distribution system.
6. Building an international team for the
company.

Multi-branding
McDonalds has been the envy of this industry since its
units average $1.6 million a year (almost twice that of
Yum!)
Multi-branding gives customers more choices and variety.

Typically, sales rise at least 20% when a second brand is

added to another Yum! brand. Has added $100,000 to
$400,000 to a unit.
Pasta Bravo will be tested as a multi-brand with Pizza Hut.
40% of multi-branding is being done by franchisees.

US Quick Service Restaurant Market

Share
Pizza
Seafood
Chicken
Mexican
0%

20%

40%

60%

80%

Restaurant Units
Licensees
Franchisees
Affliates
Company
0

2,000

4,000

6,000

8,000

The Three Components of a New Strategy

Vision

Internal
Assessment

External
Assessment

A New Strategy

Figure 7-1

Strategy Considerations
Competitive Environment
Market Target
Basis for Perceived Competitive Advantage

Key Profit Drivers

Product and/or Service Portfolio
Hello, Porter Competitive Model!

Strategy-to-Tactics
Implementation

Defining the range of business that the company

will pursue.

Responding in an appropriate and timely manner.

Delegating of responsibilities for formulating

specific strategies to people who are closer to the
demands of the customer and market.

Managing for Results

Objectives
Authority
Responsibility
Training
Motivation
Performance
Results
Reward

Control

Figure 7-4

Strategy Implementation
Senior Management

Vision
and Macro
Strategies

Business Uncertainties

Empowered Implementers
Company Culture
Risks to be Avoided
Critical Performance
Factors

Micro
Strategies
and
Tactics

Key Enterprise
Business Processes
Figure 7-3

Information Needs
Senior Management
Emerging Opportunities and Threats
External Impact of Strategies and Tactics
Internal Impact of Strategies and Tactics
Performance Measurements

Empowered
Implementers
Figure 7-5

Environmental Analysis
General Environment
Operating Environment
Competitive Positioning

s
ti ie
n
t u ts
r
po rea
p
O Th

Directions for Development

Company
Strategic
History

Company
Vision

Current
Strategy

Stakeholder
Analysis
Vision &
Strategy

Chosen
Strategy

Realized
Strategy

Company Analysis
Structure
Values/Culture
Skills
Figure 7-2

Resources

h
gt

n
tre

ss
e
kn
a
e

es

Reprinted with permission from

The Strategic Management Blueprint
Cambridge, Ma: Blackwell, 1993.

Strategic Management Process

SWOT Analysis
Strength: A collective organizational competency, asset
or capability that enables it to achieve a high level of
success.
Weakness: A collective organizational competence,
asset or capability that is competitively inferior and
provides a vulnerability that can be exploited.
Opportunity: A trend or event that could lead to a
positive change in position if addressed by a strategic
response.
Threat: A trend or event that could lead to a negative
change in position if not addressed by a strategic
response.
Source: The Art of Strategic Planning
for Information Technologies

SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

Suggest
strategies that
should be
tested against

Vision
Goals
Company Values
Financial Status
Cash Position
ROI Position
Societal Demands
Competition
Core Competencies
People Skills
Overall Resources

A Logical Approach
Find a tactic that will work.
Build it into a strategy.

Employee downsizing, right-sizing or

dumb-sizing (take your choice)
should not be based solely on cost
cutting.

Smart Sizing
Consistent with the vision and strategies of
the organization.
Help build future strengths of the company
while streamlining or eliminating
unnecessary processes and functions.
A big of a price to pay for anything less
than this.

Company Infrastructure

Data Management
User Applications
Voice Management
Network Management
Plan Process
Financial Strategy
Organization
Figure 7-7

Essential to Run a Business

Vision
Strategy
Tactics

The Importance of these

Factors as Key Priorities
Continues When People
Are Empowered with
More Authority
and Responsibility

IT Based Strategies
MARKET PLACE

OPERATIONS

SIGNIFICANT
STRUCTURAL
CHANGE

Federal Express
USA Today
Charles Schwab

Whirlpool
Xerox

TRADITIONAL
PRODUCTS
AND PROCESSES

USAA
L.L. Bean
McKesson

BancOne
Boeing
Frito-Lay
Wal-Mart

Figure 7-6

Which Way Should the Arrows Go?

Business Vision
and Strategies

Right Sizing

Re-engineering

Total Quality
Management

Conclusions

A strategy should often be kept relatively simple.

Success relies on gaining understanding,
acceptance, and support by people within the
company.
The strategy must accomplish its objectives by
providing direct or indirect value to customers.
Information Systems can only be successful if it
supports the right business strategies.