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InformationWeek IssueInformationWeek IssueJan. 27, 2003Jan. 27, 2003
CEO Visions 2003: Looking Beyond the Storm
www.Informationweek.com
Who is paying federal taxes?Who is paying federal taxes?
To be in the top 25% of all tax payers you need to earn:
$52,965.
To be in the top 50% of all tax payers you need to earn:
$26,415
Who is paying federal taxes?Who is paying federal taxes?
Percentiles Share of AGI % of Fed. Taxes Paid
Top 1% 19.5% 36.2%
Top 5% 34.0% 55.5%
Top 10% 44.9% 66.5%
Top 25% 66.5% 83.5%
Top 50% 86.8% 96.0%
Bottom 50% 13.2% 4.0%
Section 1 – The First Of Three Section 1 – The First Of Three Perspectives: The Business EnvironmentPerspectives: The Business Environment
Chapter 1 – Business and Information Systems Management
Chapter 2 – Business Competitive Environment
Chapter 3 – Porter Competitive Model Chapter 4 – Airline Industry Analysis Chapter 5 – Information Systems Can
Redefine Competitive Boundaries
Networks Cross Company Networks Cross Company Boundaries to Reap BenefitBoundaries to Reap Benefit
Efficiency – maximizing output while minimizing expense and unnecessary effort.
Effectiveness – creating a strong impression in the overall scheme of the business by broadening tasks, activities and even entire jobs.
Competitive Advantage – creating Interorganizational Systems through strategic alliances (extended enterprise) and links with customers.
Alliances Provide Growth Alliances Provide Growth OpportunitiesOpportunities
Three major markets – North America, Europe, and the Pacific Rim.
Fight your competitor in your market or face the possibility of your competition fighting exclusively against you in your own market.
Electronic Data InterchangeElectronic Data Interchange
Exchange of routine business transactions in a structured, computer-processable format.
Logical extension of existing systems. Obstacles – format incompatibility, timing
windows, service cost, etc. EDI Value Added Networks – support for
electronic mailbox to address time windows, multiple routing paths, ensuring data format compatibility between systems
E-mail Enabled ApplicationsE-mail Enabled Applications
Non-simultaneous communication.
Replaces traditional paperwork as forms are filled out and submitted via electronic mail.
Possible Exam QuestionsPossible Exam Questions
1. What advise would you give to a company that is contemplating several new strategic alliances?
2. How can information systems contribute to establishing successful strategic alliances?
What we’ve covered…What we’ve covered…
Course Overview Business Competitive Environment Porter Competitive Model Airline Industry Analysis Information Systems – redefining
competitive boundaries
What’s next . . .What’s next . . .
VisionStrategyTactics
Business Plan
• Competitive Options• Roles, Roles and Relationships• Redefine and/or Define• Telecommunications as the Delivery Vehicle• Success Factor Profile
A Systematic ApproachSection II: Company Section II: Company
PerspectivePerspectiveShown in the model are Shown in the model are
the business and IS the business and IS
factors that need to be factors that need to be
addressed to successfully addressed to successfully
use information systems use information systems
to gain a competitive to gain a competitive
advantage.advantage.
Primary Objective of ChapterPrimary Objective of Chapter
To understand the important of establishing a
well understood vision as the starting point in
directing, posturing and running a business.
The Vision ProcessThe Vision Process
To establish a clearly vision of the future
To provide a basis for sharing values and views
Uncertainties of a VisionUncertainties of a Vision
The dynamics of the market (customers). Rapidly changing technologies that frequently
offer new product life cycles. The logic and need to address changing employee
values and traditional ways that work is done. The shift from the old to new regulatory practices
in many industries.
USAAUSAA
Property and Casualty insurance and financial services institution based on membership of military personnel and their dependents.
General Robert F. McDermott, CEO and President and his role of the business visionary
Whirlpool CorporationWhirlpool Corporation
The World’s Largest Manufacturer and Marketer of Major Home Appliances
David Whitwam, CEO in 1987. Initiated global vision in 1988
ConclusionsConclusions
1. Leadership is a key factor in establishing an
effective vision for an organization.
2. While accomplishing this can represent a major challenge, it can be a critically important thing to do to assure the long term success of the organization.
CEO Job DescriptionCEO Job Description
The primary job of a CEO is deal with the long-term viability of the business.
Leaders combine vision with communication that leads to a shared purpose.
A leader sets the vision which is different from being a visionary.
The essence of competitiveness isvision, leadership and a hunger to succeed.
P. R. VagelosChairman and CEOMerck
A Business Vision
• A vision is a photograph of the future.
• It is a self-image that deals with what the business wants to look like over the long range future.
• Business visions are realistic, credible and attractive to people within the organization.
Jack Welch Vision for GEJack Welch Vision for GEHis vision was for GE to become the most competitive enterprise on earth.
His wanted to create a small company spirit in a big company body, to build an organization out of an old line industrial company that would be high spirited, more adaptable, and more agile than companies one-fiftieth the size.
He wanted GE to be a company where people dared to try new things—where people felt assured in knowing that only the limits of creativity and drive, their own standards of personal excellence, would be the ceiling on how far and how fast they move.
Larry Ellison Vision for OracleLarry Ellison Vision for Oracle
To be the world leader in providing software applications over a network and hardware designed and priced to serve those needs.
Ellison suggests that the software industry as we know it today will vanish and be replaced by a service industry.
Microsoft VisionMicrosoft Vision
Empower people through great software, anyplace, any time and on any device.
ValuesBeliefs
Principles
VisionMission
Goals
Culture
Objectives and
Measurements
Strategies
Tactics
Authorityand
ResponsibilityBusinessPlan
The Vision ThingThe Vision Thing
Organizations are frequently brought to crisis by
conflicts over basic issues of mission, values, and
vision.
Without these basic agreements in place, no
organization is truly viable at least over a long term.
Mission, Vision and ValuesMission, Vision and Values
Mission, vision and values are the glue that holds an organization together.
They describe what you're trying to do, how you want to go about it, and where you're headed.
Knowing these things helps to keep your organization on track.
These crucial factors provide a yardstick to measure present performance and plans against aspirations.
Mission, Vision and ValuesMission, Vision and Values
• MISSION is the reason an organization exists.
• The founders' intentions.
• What they intended to achieve by starting the organization.
• This must be reexamined and refreshed periodically if an
• organization is to remain dynamic.
.
•
VisionVision
•VISION is what keeps people within an organization moving forward,
even against discouraging odds.
•Vision is the most powerful motivator in an organization.
•If it's vivid and meaningful enough, people can do unbelievable things to
bring it to realization.
•But if it's lacking, no amount of resources will be able to get people to
make any kind of a concerted effort.
Values (Culture)Values (Culture)VALUES manifest in everything you do as a group, not only your public
programs, but also how you operate. One organization may identify
access as a primary value. When they plan programs, they think
foremost about how to remove the barriers and encourage the widest
possible participation. Another group might value product quality
above all else. When they assign budget priorities, they opt
for expenditures that improve quality above all others.
Articulating values provides everyone with guiding lights, ways of
choosing among competing priorities and guidelines about how people
will work together.
Gerstner and IBM Gerstner and IBM
Lou Gerstner caused a stir two months after
becoming IBM’s CEO when he declared at his major
significant press conference that the last
thing IBM needed was to proclaim a grand vision.
Culture ChangeCulture Change
Changing IBM's culture was Gerstner's most challenging
long-term task.
Early in his tenure, he told employees, “We've lost $16
billion in the last three years; Fortune magazine says we're a
dinosaur. Don't you think we ought to change? It's pretty
obvious what we're doing isn't working."
Gerstner ApproachGerstner Approach
Gerstner constantly asked managers, "What are your
customers telling you?
Do you understand your market?
Have you segmented your market?"
He ran IBM like the customer that he used to be.
He believed that five years were required to transform
an enormous, far-flung organization like IBM.
Executive VisionExecutive Vision
If a company has restructured where do they turn for business performance and financial improvement?
Job experience can easily count more than intuition.
A broad grounding in a particular industry is a prerequisite to successful direction setting.
Visionaries can draw a conceptual roadmap to some imagined future.
The most important thing that I have learned is that the time for a business to go from chump to champ to chump used to be two to three decades and now it is five to seven years.
Bill McGowanFormer CEO of MCI
VisionStrategyTactics
Business Plan
• Competitive Options• Roles, Roles and Relationships• Redefine and/or Define• Telecommunications
as the Delivery Vehicle• Success Factor Profile
A Systematic Approach
A Shared Vision Positions IT
1. Achieve Strategic Synergy.
2. Put the Onus on the Owners.
3. Leverage Learning.
4. Extend Externally.
5. Chuck the Organization Chart.
6. Indulge in Information.
7. Make a Bee-line for Benefits.
““The Vision Trap”The Vision Trap”11
Grand, abstract visions can be too inspirational. The company may wind up making more poetry than products.
Gerard H. Langeler
President, Mentor Graphics
Sensing Opportunity
Vision
Strategy
Tactics and Business Plan
Agreement &Commitment
Implementation(Action)
Feedback
The Vision to ActionProcess
Figure 6-1
Vision ExamplesVision Examples
• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.
• Gil Amelio at National Semiconductor
If Starting TodayIf Starting Today
Robert McDermott, USAA Jack Welch, General Electric
David Whitwam, Whirlpool Jeff Bezos, Amazon.com
Peter Lewis, Progressive Corp. Charles Schwab, Schwab & Co.
Michael Dell, Dell Computer Sam Walton, Wal-Mart Stores
Fred Smith, Federal Express Meg Whitman, eBay
Louis Gertsner, IBM Akio Morita, Sony
Lee Kuan Yew, Singapore, Inc.
USAAUSAA• Financial Services Company.
• Headquartered in San Antonio, Texas.
• A member owned association.
• Started by Army officers who had difficulty getting insurance.
• Historically managed by former military officers.
• Top-rated for customer service and financial performance.
McDermott Leadership
• Increased assets from $207 million to $8.5 billion. • Grew customer base from 650,000 to 2.4 million.
• Significantly increased the level of customer service.
• Broadened the product base.
• Decreased the high annual employee turnover rate.
• Redefined the business from a property and casualty insurance company to a financial services organization.
USAA Vision 2000An Events Oriented Organization
Needs WantsMember (Customer)
Key Points Security Quality Asset of Life Management
Supporting Insurance Consumer FinancialSystems Products Services Services Products Products
Figure 6-2
USAA’s ultimate goal is to manage its customer relationships and not its individual products.
How does this relate to information systems?
USAA Products and ServicesUSAA Products and Services
So integrated that members lose
something if they go elsewhere.
1. Customer Convenient
2. Operator Efficient
3. Cost Effective
USAA Business and IS GoalsUSAA Business and IS Goals
Information Systems StrategiesInformation Systems Strategies
• Executive Partnership
• Strategic Architectures
• Technology Experimentation
• External Resource Leverage
• Technology Assimilation
• Horizontal Integration
IT at USAAIT at USAA
• 28,000 workstations for 22,709 employees.• 7 mainframe computers.• 750 client server systems.• Own and operate a communications company.• 4,300 AT&T Trunk Lines: 94 million annual
telephone calls representing 90% of business transactions.
• 1,300 Information Systems people. (ITCo)
12/31/99
USAA Image Processing
Direct AccessStorage Drive
Document DatabaseDirect AccessStorage Drive
Token Ring LAN
StorageManager
FolderManagementApplication
A
P
I
A
P
I
InnerServer
API
On-line Optical Disks
Service RepresentativesM
ailr
oom
ScannerImage Workstation
Application Workstation
Image Workstation
ApplicationWorkstation
Optical StorageLibrary
(Not On-line)
][
Mainframe Computer
Figure 6-3
1. Provides quality service.2. Attracts, trains, retains and motivates employees.3. Aggressively and successfully uses information technology.4. Provides products and services to address the changing needs of its customers.5. Maintains one of the lowest operating expense ratios in the industry.6. Achieves financial results that warrant excellent to superior ratings.7. Makes business, organizational and management changes on a timely basis.8. Had an outstanding CEO in General McDermott.
USAA Success ConclusionsUSAA Success Conclusions
• Traditionally, a successful, well-managed company.• A new CEO in 1987 who initiated a global vision in 1988.• A global strategy that emphasized:
- Product Technology- Procurement
• Promoted a theme of “Thinking global but acting local.” • Manufactures in 13 countries, has nearly 50 product technology centers and markets products under 13 brands in 170 countries. • Has the patience to allow the global strategy to evolve.• Is the only company with a presence in four of the five global markets.• Has realized impressive growth in revenue but not profits.• Is becoming a new Whirlpool.
Whirlpool CorporationWhirlpool Corporation
Financial PerformanceFinancial Performance
1991 - $6.5 billion in global sales
2001 - $10.3 billion in global sales.
1991 - $353 million in operating profit
2001 - $306 million in operating profit
.0297% .078%
2002 was a better year.
Whirlpool Corporation
Principal ProductsAutomatic Dryers
Automatic Washers
Dehumidifiers
Dishwashers
Freezers
Microwave Ovens
Ranges
Refrigerators
Trash Compactors
Room Air Conditioners
2001 Whirlpool Global Sales
0% 10% 20% 30% 40%
Refrigerators and freezers
Laundry appliances
Cooking appliances
Other
Who Buys Large Appliances?Who Buys Large Appliances?
1. Contractors for new homes.
2. Home owners for replacements.
3. Appliance service businesses.
4. Businesses and public sector entities.
5. First time appliance buyers.
Appliance BrandsAppliance BrandsWhirlpool
Kitchen AidRoperWhirlpool
Kenmore*
* Manufactured for Sears
Maytag
AdmiralHardwickHooverJenn-AirMagic ChefMaytagNorge
GE
GERCAHot Point
Electrolux
FrigidaireGibsonElnaEurekaKelvinatorO’Keefe and MerrittTappanWhite- Westinghouse
Differentiation Strategy!?Differentiation Strategy!?
• Clothes Management System
• Food Management System
• Home Management System
• Garage Management Systems
Whirlpool Strategic Design
• Mission Statement
• Vision
• Value Creating Objectives
• Shared Values
• Worldwide Excellence System
Whirlpool CorporationWhirlpool CorporationHow We Must Work, Think, Plan and Manage to Reach Our ObjectivesHow We Must Work, Think, Plan and Manage to Reach Our Objectives
Whirlpool People
Leadership
Quality of Processes and Products
Fact-Based Management
Strategic Planning
Measurement and Results
Customer Satisfaction Figure 6-4
1. Stick to its large appliance knitting within the North American market and fight for increased market share with the hope that economic factors would improve its market conditions.2. Diversify within the North American market.3. Pursue a global strategy as a conservative player in multiple global markets.4. Pursue an aggressive global strategy with the objective of leading the redefining of the world- wide large appliance industry.
Four Whirlpool OptionsFour Whirlpool Options
Whirlpool Mission StatementWhirlpool Mission Statement
To shape and lead the major home appliance industry globally, becoming one of the world’s great companies while creating value for shareholders, employees, customers, suppliers, government leaders and communities.
WhirlpoolWhirlpool Vision Vision
Whirlpool, in its chosen lines of business, will grow with new opportunities and be the leader in an ever-changing global market. We will be driven by our commitment to continuous quality improvement and to exceeding all of our customers’ expectations. We will gain competitive advantage through this, and by building on our existing strengths and developing new competencies. We will be market driven, efficient and profitable. Our success will make Whirlpool a company that worldwide customers, employees and other stakeholders can depend on.
Pyramid of ExcellenceStakeholder Value
Measurement
& Results
Customer
Satisfaction
Strategic
PlanningFact-Based
Management
Customer Satisfaction
People
Commitment
Values
Vision
WorldwideExcellence
System
Value CreatingObjectives
WhirlpoolPeople Quality Process
& Products
Leadership
Growth & Innovation
TotalQuality
Where
Way
What
How
Whirlpool CorporationWhirlpool Corporation
The market of tomorrow will be huge, filled with tough savvy customers with a wide range of preferences and choices. We must fulfill their needs and meet their expectations in quality and service. We must surprise them.
David R. WhitwamWhirlpool CEO
1. Product Technology.
2. Procurement.
3. Information Systems
Platform for Global SuccessPlatform for Global Success
GE Versus WhirlpoolGE Versus Whirlpool
Has tried for years to dislodge Whirlpool as No. 1 in the US.
GE spent $100 million to develop a new washer.
Plastic washer basket versus traditional porcelain.
Lost a major battle to win Sears’ washer business.
Gained two percentage points in market share in 2000. (2% is $400 million in a $20 billion market.)
Offered significant purchase rebates.
Operating profits were 12% (low for GE).
President of GE: “Being in this business is painful.”
Worldwide Major Appliance Industry
United States Whirlpool General Electric Maytag
Sweden Electrolux
Figure 6-5
Japan Matshushita Electric Hitachi
Korea Samsung
Morita and SonyMorita and SonySony was born in 1946 when Morita, the oldest son of a rice wine brewer, joined former Japanese navy colleague Masaru Ibuka, a fellow engineer, to start a business repairing radios on a borrowed $500. A significant number of firsts: - Japan’s first transistors in 1954.
- Japan’s first transistor radio in 1955. - First Japanese company to be listed on the NYSE.
- First Japanese company to build a U.S. factory. Morita told engineers to make Walkmans despite the lack of market research. “We don’t believe in market research for a new product unknown to the public. So we never do any.”
Approach emphasis: innovation in design, manufacturing and marketing.
Lee Kuan Yew and Singapore Inc.Lee Kuan Yew and Singapore Inc.
Although no nation's history can ever be reduced to the story of one man, Lee Kuan Yew had such a paramount role in making modem Singapore that an understanding of that country, its society and its business environment cannot be complete without an attempt at understanding Lee himself.
NewspapersNewspapers
Newspapers serve our democratic society by vigilantly protecting the people’s right to know. Newspapers are the leaders in providing news, editorial comment, information and advertising.
Newspaper Association of America
Newspapers will remain vital and Newspapers will remain vital and sustain their vigilance by:sustain their vigilance by:
1. Investing energy and resources to strengthen their value to readers and advertisers.
2. Continuing to be the most comprehensive source of gathering, organizing and presenting news and information.
3. Pioneering businesses that anticipate and meet the changing needs and desires of consumers and marketers.
4. Attracting, retaining and advancing a talented, creative and diverse workforce.
US Advertising Spending
0% 10% 20% 30% 40% 50%
Radio
Broadcast TV
Cable TV
Direct Mail
Others
Internet
Newspapers1960
1970
1980
1990
2000
2001
US Advertising Expenditures
$0 $50 $100 $150 $200 $250 $300
1960
1970
1980
1990
2000
2001
Billions of $
A Good Vision StatementA Good Vision Statement
• Provides a clear picture of what the company wants to be in the future.
• Excites and motivates people and gains consensus and commitment.
• Focuses on operations.
• Is measurable at least in general terms.
• Establishes a standard of excellence.
• Changes the basis for competition.
Increasingly, companies are usingvision statements to explain who theyare, where they are going and whycustomers and employees should follow them there.
Business VisionBusiness Vision
A Good Vision Statement?A Good Vision Statement?
To continue to be the world’s best way to pay and be paid for consumers and businesses.
Visa International
Good Vision Statement?Good Vision Statement?
Sun Microsystems
To make the maximum computing power available to a broad user audience through open technologies.
Sun Vision StatementSun Vision Statement
To be an industry leader, you need vision.
But that’s just the beginning.
You also need the people, products, and relationships to take your vision to market and turn it into a compelling reality.
Good Vision Statement?Good Vision Statement?
To provide the best service and lowest fares to the short haul, frequent-flying, point-to-point, non-interlining traveler.
Southwest Airlines
When you have a vision and someone comes to you with some convoluted idea, you should be able to hold it up to the vision and ask: Does it fit? Does it fly? If not, don’t bother with it.
The ingredient that catapulted Southwest to the top of the industry is simple, elegant and well publicized.
Discipline, focus and execution.
Throughout its existence, Southwest has consistently adhered to a clearly defined purpose and a well thought out strategy for accomplishing it.
Wal-Mart VisionWal-Mart Vision
“I concentrated all along on building the finest retailing company that we possibly could. Period.”
“Creating a huge personal fortune was never a goal of mine.”
Sam Walton
Wal-Mart VisionWal-Mart Vision
Walton built incrementally, step by step from a single store until a rural discount store model popped out as a natural evolutionary step.
If you are not serving the customer or supporting
the folks that do then we don’t need you.
Wal-Mart Core ValuesWal-Mart Core Values
1. We exist to provide value to our customers—to make their lives better via lower prices and greater selection; all else is secondary.
2. Swim upstream, buck conventional wisdom.
3. Be in partnership with employees.
4. Work with passion, commitment and enthusiasm.
5. Run lean.
6. Pursue ever-higher goals.
Built to Last ConclusionsBuilt to Last Conclusions
1. A visionary company does not by definition start with a
great idea.
2. A charismatic leader is not required for a visionary company.
3. There are no standard core values to be a visionary company.
4. A visionary company is not built on frequent change but a
focus over time on its core ideology.
Built to Last ConclusionsBuilt to Last Conclusions
5. Visionary companies may appear conservative to outsiders but they are not afraid to make bold commitments and/or establish ambitious goals.
6. Only those people who fit well with the core ideology and the demanding standards of a visionary company will find it a great place to work.
7. Visionary companies make some of their best moves by experimentation, trail and error, opportunism and accidentally.
8. Great visionary companies seldom go outside to hire a new CEO.
Built to Last ConclusionsBuilt to Last Conclusions
9. Visionary companies focus primarily on beating themselves.
10. Visionary companies believe they can accomplish major objectives simultaneously without making major negative trade-offs.
11. Visionary companies attained their successful status not so much because they made visionary pronouncements (although they frequently did) but by pursuing a never-ending process of emphasizing the above factors.
Soft Visionaries?Soft Visionaries?
Visionary does not mean soft and undisciplined.
Because the visionary companies have such clarity about who they are, what they are about and what they are trying to achieve, they tend to not have much room for people unwilling or unsuited to their demanding standards.
A Logical Vision ProcessA Logical Vision Process
• Define the Business Environment.
• Build a Company Vision.
• Turn the Vision into a Plan.
• Drive Action with the Plan.
By instilling:
Leadership
Vision
Strategy
Tactical Excellence
Innovation
A Great Company
You create:
Improved Performance
Market Impact
Sustained Success
Excellent Reputation
Which results in:
Leadership SignificanceLeadership Significance
Take a measure of the people at the top of a business and you will get a clearer sense of that company’s past accomplishments and future prospects than from its balance sheet, profitability, cash flow, market share and market capitalization.
People matter most and accounting cannot quantify their value.
The drama of a business lies in the people who make things happen.
Andy GroveAndy GroveWalked out of Communist Hungary when he was 20 years old in 1956 and arrived in the US in 1965 with no money and no English capability.
Worries about fighting complacency and emphasizes measuring failure.
An intellectual and a visionary who says he doesn’t know the next big thing that will happen in his industry who has achieved phenomenal success but is always afraid.
Earned a degree in Chemical Engineering from NYU and a PhD from Cal, Berkeley in 1963.
“As a manager, fear is your ally because it gets you out of your comfort zone.”
Andy GroveAndy Grove“Don’t eliminate the fear of what is going to happen if you don’t move.”
A good manager will train people to deal with fear by example, by discussion, by cognitive processes.
It was very difficult to decide to get out of the memory business because we had created the business in the first place. This meant reducing the company in terms of people by one third and closing eight facilities (also 1/3).
These kind of decisions are easier if you can take an outsider’s perspective of the situation. When in doubt, talk to customers who are unhappy with what you are doing.
Andy GroveAndy Grove
Current concerns: Intel has become a very big business. It is a world wide business with a phenomenal track record. It grew very rapidly and transformed.
A lot of hard work went into reinventing the PC the right way—finding new uses and finding them any where in the world.
Maintaining the engine of reinvention, of new customers and new uses and keeping that engine going is a major concern.
Andy GroveAndy Grove
Intel’s success is based on three foundations:
1) Product Design
2) Technology and Manufacturing
3) Marketing and Sales
All three must be equally strong.
A Vision that WorksA Vision that Works
• It gains commitment and energizes employees.
• It creates meaning in employees lives.
• It helps to establish a standard of excellence.
• It bridges the past and the future.
• It assures future business success.