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CIO of the Future 2012 Masterclass -  The Gap Between Business And IT
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CIO of the Future 2012 Masterclass - The Gap Between Business And IT


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CIO of the Future Masterclass presentation of C. Voisey

CIO of the Future Masterclass presentation of C. Voisey

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  • 1. The CIO of the Future 2011-2012The Gap Between Business and ITStrategic Consistencybetween IT and BusinessProfessor dr. Christopher J. 5 November 2012Leadership • Entrepreneurship • +31 (0)346-291 291
  • 2. 2Value creation and capture Willingness-to-pay Buyer’s Share Price Value Created Firm’s Share Cost © Dr. Christopher J. Voisey
  • 3. 3 Competitive advantage•  A firm has a competitive advantage over its rivals if it has driven a wider wedge than competitors between the willingness to pay it generates among buyers and the costs it incurs >  A customer’s willingness to pay for a product or service is the maximum amount of money that a customer would be willing to part with in order to obtain the product or service.•  To create an advantage, a firm must configure itself to do something unique and valuable•  Competitive advantage usually comes from the full range of a firm’s activities – from production to finance, from marketing to IT/ICT and logistics – acting in harmony © Dr. Christopher J. Voisey
  • 4. 4Advantage: options for strategic positioning System Lock-In Dominant Exchange eBay, Yellow Pages, Visa/ Proprietary Standard MasterCard Microsoft, Intel, Cisco Exclusive Channel/Restricted Access Coca-Cola, Walls, rural Wal-Mart Horizontal Breadth Enabled Through Low Cost Fidelity, Amazon Effective Use of Southwest Airlines, Nucor Technology Total Customer Solutions Best Product Redefining the Customer Customer Differentiation Relationship Integration Sony Wega, Rolls-Royce, Disney, McDonald’s SAS, Château Lafitte HP Enterprise Services Source: Adapted from Hax (2001; 2010) © Dr. Christopher J. Voisey
  • 5. 5Example of customer segmentation: DMK Source: Hax (2005) © Dr. Christopher J. Voisey
  • 6. 6Activity-system map of IKEA•  A company’s strategic position is contained in a set of tailored activities designed to deliver it•  In companies with a clear strategic position a number of higher- order themes (shaded) are implemented through clusters of lightly linked activities (unshaded) Adapted from Porter (1996) Activities directly affecting the customer experience and value proposition shown in orange © Dr. Christopher J. Voisey
  • 7. Dynamics of Strategy: The Games of Competitiveness 7A firm exists within an industry landscape of manypeaks and interacting choices To improve long-run prospects a firm may have to step down and tread through the a valley III. Create a new emerging rock? ? II. Find a new emerging rock? I. Compete on the current rock? Decision 1 Decision 2 IV. Change the underlying landscape to create new rocks © Dr. Christopher J. Voisey
  • 8. 8Tightly-bound sets of choices withhigh profitability …harder to go down, harder for others to climb (imitate) © Dr. Christopher J. Voisey
  • 9. Dynamics of Strategy: The Games of Competitiveness 9The management team must guide their firm toa high point on a rugged and fog-enshroudedlandscape Where is the high ground? © Dr. Christopher J. Voisey
  • 10. 10Mission and objective (ends)•  Mission: Why do we exist? The underlying motivation for being in business >  an insurance company might define its mission as:“to provide financial security to consumers”•  Objective: The precise outcome that will drive the business over the next five years or so >  Boeing: from being the largest player in the aircraft industry to being the most profitable © Dr. Christopher J. Voisey
  • 11. 11 What is your mission?•  Mission: Why do we exist? The underlying motivation for being in business •  NEM: “Be the preferred partner for custom-made solutions in the field of industrial, utility, and heat recover steam generators and related equipment.” © Dr. Christopher J. Voisey
  • 12. 12What is your objective?•  Which objective is likely to maximize shareholder value over the next several years? •  Specific •  Measurable •  Time-bound …by 31 December 2014? © Dr. Christopher J. Voisey
  • 13. 13What is your scope (domain)?•  A firm’s scope encompasses four dimensions: >  Vertical integration >  Customer >  Offering (product or service) >  Geographic location•  These four dimensions vary in relevance © Dr. Christopher J. Voisey
  • 14. 14 14How will you deliver your advantage (means)?•  The complete definition of a firm’s competitive advantage has two parts: >  External: a statement of the customer value proposition (answer to why customers will buy your product or service) >  Internal: the unique activities or the complex combination of activities that allows the firm alone to deliver the customer value proposition © Dr. Christopher J. Voisey
  • 15. 15Identify your sources of competitive advantageThere is no universal key to success, but three main categories of competitive advantage are from: •  Positions •  Capabilities •  Values What are your current sources of advantage and which new sources must you acquire to deliver your customer value propositions? © Dr. Christopher J. Voisey
  • 16. 16What are your positional sources of advantage?•  Brand name•  Customer relationships•  Government protection and support•  Status•  Distribution channels•  Geographic incumbency•  Installed base and de facto standards•  Gatekeepers in the flow of goods or information © Dr. Christopher J. Voisey
  • 17. 17What capabilities are your sources of advantage? Examples •  “Low cost” from having learned how to combine inputs more efficiently than other firms •  Merck: a leading pharmaceutical with a capability for extraordinarily productive R&D •  Georgia-Pacific: knows how to make high-quality paper © Dr. Christopher J. Voisey
  • 18. 18Which values are your sources of advantage? What we believe in… How we will behave… •  E.g., respect individual differences, sustain the environment •  Lycos CEO Davis: an abiding belief in the virtues of hard work and frugality “People don’t bring their pets to work or play football in the cafeteria here.” © Dr. Christopher J. Voisey
  • 19. 19Business strategy – concepts and linkages Mission Ends Objective Scope Domain Advantage External Activities Means Internal Capabilities Positions Values Sources © Dr. Christopher J. Voisey
  • 20. 20Criteria for assessing a strategy External Consistency >  Does the strategy tap opportunities and neutralize the threats of the outside world in an effective and unique way? Internal Consistency >  Do the parts of the strategy fit together well to form a whole that is greater than the sum of the parts? Dynamic Consistency >  Does the strategy call on the firm to do today what is required to succeed tomorrow? © Dr. Christopher J. Voisey
  • 21. 21Testing your business strategy MissionExternal consistency Ends (Our customers) Internal consistency Objective (Our activities and sources) Scope Domain Advantage External Activities Means Dynamic consistency Internal (Tomorrow) Capabilities Positions Values Sources © Dr. Christopher J. Voisey
  • 22. 22Edward Jones’ Succinct Strategy Statement Jones aims to “grow to 17,000 financial advisers by 2012 [from about 10,000 today] by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one-financial-adviser offices.” © Dr. Christopher J. Voisey
  • 23. 23“conservative” Our investment philosophy is long-term buy and hold. We do not sell penny stocks, commodities, or other high-risk instruments. As a result we do not serve day traders and see no need to offer online trading. We charge commissions on trades because this is the cheapest way to buy stocks (compared with a wrap fee, which charges annually as a percentage of assets) when the average length of time the investor holds the stock or mutual fund is over 10 years. © Dr. Christopher J. Voisey
  • 24. 24“individual”We do not advise institutions or companies.We do not segment according to wealth, age, or otherdemographics. The company will serve all customersthat fit its conservative investment philosophy. Brokerswill call on any and every potential customer.Stories abound within Jones of millionaires who live intrailers – people all the other brokerages would neverthink of approaching. © Dr. Christopher J. Voisey
  • 25. 25“investors”Our basic service is investment. We do not seek tooffer services such as checking accounts for theirown sake, but only as part of the management of aclient’s assets. © Dr. Christopher J. Voisey
  • 26. 26“who delegate their financial decisions”We do not target self-directed do-it-yourselfers, whoare comfortable making their own investmentdecisions. We are also unlikely to serve validators,who are merely looking for reassurance that theirdecisions are correct. © Dr. Christopher J. Voisey
  • 27. 27Competitive Advantage through Differentiation Edward Jones Product/Service Sale Online Competitor Product/Service Sale Willingness-to-pay say, $120 Buyer’s EJ Trade Share: Price: $100 $20 ValueCreated: Edward $100 Jones’s Share: $80 Buyer’s Share: Cost of a trade $0 say, $20 WTP = Online Online Trade firm’s Value Price: $8 Share: Created: $6 Cost of a trade $2 $6 © Dr. Christopher J. Voisey
  • 28. 28Edward Jones’s Activity System Source: Harvardbusinessonline © Dr. Christopher J. Voisey
  • 29. 29Edward Jones and IT•  Historically a satellite-based IT/ICT system•  Traditional aversion to technology between broker and the customer •  Financial advisors prohibited from using PCs •  No customers may trade online•  Recent online access to customers’ accounts•  Direct email communication between brokers and customers not allowedKey: increasing technological sophistication does not imply increasing financialsophistication and that customers have the time to decide their own investments © Dr. Christopher J. Voisey
  • 30. 30What element of Edward Jones’s strategy shouldit change? Strategy  Element   Change  to…   Pricing   Wrap  fees  and  nothing/trade   Product  scope   Add  op2ons,  IPOs,  hedge  funds,  long-­‐term  care  insurance  to  meet   the  needs  of  HNW  individuals  and  re2rees   Location   Shi@  to  metropolitan  areas  and  office  buildings   Service   Begin  to  offer  2ered  service  to  different  customer  segments  e.g.,   spend  more  2me  and  bundle  pricing  to  HNWs   Financial  planning   Offer  a  complete  financial  planning  service   Customers   Give  up  accep2ng  everybody  who  walks  through  the  door  and  start   targe2ng  HNWs,  or  at  least  the  mass  affluent   FAs   Start  hiring  more  sophis2cated  FAs  who  can  deal  with  the   complexi2es  of  re2rement  and  distribu2on   St.  Louis   Move  some  support  personnel  into  the  field  as  specialists   Compensation   Increase  the  payout  to  junior  brokers  to  stop  them  job  hopping,  and   start  paying  for  the  book  of  re2ring  brokers  to  stop  them  being   stolen   Technology   Add  Internet  capability  to  customers;  redefine  “convenient”  to  mean   24/7   Marketing   Increase  na2onal  adver2sing  to  match  compe2tors   © Dr. Christopher J. Voisey
  • 31. 31 Strategic consistency•  Strategy is about choosing to serve customers in a way that rivals cannot•  Good strategy delivers sustainable competitive advantage•  Identifying a firm’s strategy is a necessary prior to evaluating that strategy•  The strategy’s essence must be communicated and easily internalized by everyone in the organization © Dr. Christopher J. Voisey
  • 32. 32Strategic consistency•  Strategy is about making trade-offs•  Tradeoffs involve making choices >  Providing more (or less) of A necessitates less (or more) of B >  Serving customer X better (or worse) means serving customer Y worse (better)•  Tradeoffs substantially increase the cost of imitation•  Tradeoffs cause competitors to not want to imitate © Dr. Christopher J. Voisey