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  • INTRODUCTION History of Strategic Uses of IT — Since the mid-1980s, strategic uses of IT have bounded among Working inward, Working outward, and Working across. The current main focus is working across.
  • Mc nurlin 03

    1. 1. Strategic Uses of Information Technology Chapter 3 Information Systems Management In Practice 7E McNurlin & Sprague PowerPoints prepared by Michael Matthew Visiting Lecturer, GACC, Macquarie University – Sydney Australia
    2. 2. Chapter 3 <ul><li>Use of the Internet by businesses set off a revolution in the use of IT, so that utilizing the Internet to conduct business became the strategic use of information technology. </li></ul><ul><li>The questions that remain are: </li></ul><ul><ul><li>Has the revolution ended, or </li></ul></ul><ul><ul><li>Does an even larger revolution loom? </li></ul></ul><ul><ul><li>Does IT still matter?, and </li></ul></ul><ul><ul><li>What sorts of strategic uses are companies making? </li></ul></ul>
    3. 3. Chapter 3 cont. <ul><li>Strategic roles of IT fall into one of three categories: </li></ul><ul><ul><li>“ working inward” (improving a firm’s internal processes and structure) </li></ul></ul><ul><ul><li>“ working outward” (improving the firm’s products and relationships with customers) and </li></ul></ul><ul><ul><li>“ working across” (improving its processes and relationships with its business partners) </li></ul></ul><ul><li>Grainger, GE Power Systems, Wire Nova Scotia, The Shipping Industry, Cisco Systems and UPS Supply Chain Solutions, Semco, S. A., A Day in the Life of an E-lancer, General Mills and Land O’ Lakes, Sara Lee Bakery Group, and Dell Computer serve as examples of how companies are using information systems in strategic roles </li></ul>
    4. 4. Today’s Lecture <ul><li>Introduction </li></ul><ul><ul><li>History of Strategic Uses of IT </li></ul></ul><ul><ul><li>Whither the Internet Revolution? </li></ul></ul><ul><ul><li>The Cheap Revolution </li></ul></ul><ul><ul><li>Episode Two: Profitability Strikes Back </li></ul></ul><ul><ul><li>Does IT Still Matter? </li></ul></ul><ul><li>Working Inward: Business-to-Employee </li></ul><ul><ul><li>Building an Intranet </li></ul></ul><ul><ul><li>Fostering a Sense of Belonging </li></ul></ul>
    5. 5. Today’s Lecture cont. <ul><li>Working Outward: Business-to-Consumer </li></ul><ul><ul><li>Jumping to a New Experience Curve </li></ul></ul><ul><ul><li>The Emergence of Electronic Tenders </li></ul></ul><ul><ul><li>Getting Closer to Customers </li></ul></ul><ul><ul><li>Being an Online Customer </li></ul></ul><ul><li>Working Across: Business-to-Business </li></ul><ul><ul><li>Coordinating with Co-suppliers </li></ul></ul><ul><ul><li>Establishing Close and Tight Relationships </li></ul></ul><ul><ul><li>Becoming a Customer-Centric Value Chain </li></ul></ul><ul><ul><li>Getting Back-End Systems into Shape </li></ul></ul>
    6. 6. Introduction <ul><li>Use of the Internet by businesses in mid/late ’90s set off a revolution in the use of IT </li></ul><ul><ul><li>Utilizing the Internet to conduct business became the strategic use of IT </li></ul></ul><ul><ul><ul><li>Strategic = having a significant, long-term impact on a firm’s growth, industry and $$ </li></ul></ul></ul><ul><li>What now? </li></ul><ul><ul><li>Dot-com crash </li></ul></ul><ul><ul><li>A larger revolution to come? </li></ul></ul><ul><ul><li>Does IT still matter? </li></ul></ul><ul><ul><li>What strategic uses are companies making of IT (esp. the Internet) </li></ul></ul>
    7. 7. Introduction Figure 3-1 Strategic Uses of Information Systems
    8. 8. Introduction Last 20 Years – Strategic Uses of IT <ul><li>1 st edition </li></ul><ul><ul><li>Mid 1980s, hot topic = end user computing (working inward) </li></ul></ul><ul><ul><ul><li>Help employees learn about PCs </li></ul></ul></ul><ul><li>2 nd edition </li></ul><ul><ul><li>Late ’80s strategic use focused outward to gain competitive advantage </li></ul></ul><ul><ul><ul><li>e.g. Merrill Lynch cash management account </li></ul></ul></ul><ul><ul><ul><ul><li>Now considered ‘normal’ = competitive necessity Vs. competitive advantage </li></ul></ul></ul></ul>
    9. 9. Introduction Last 20 Years – Strategic Uses of IT cont. <ul><li>3 rd & 4 th editions (1990s) </li></ul><ul><ul><li>Strategic use attention turned inward to reengineering business processes </li></ul></ul><ul><ul><ul><li>Intent = not to automate existing processes but to totally redesign how the enterprise operated </li></ul></ul></ul><ul><ul><ul><ul><li>Good idea but many failed as they were ‘lay-off’ plans </li></ul></ul></ul></ul><ul><ul><ul><li>Introduction of ERP systems was also aimed at internal operations, specifically providing single sources of data enterprise-wide </li></ul></ul></ul>
    10. 10. Introduction Last 20 Years – Strategic Uses of IT cont. <ul><li>3 rd & 4 th editions (1990s) cont. </li></ul><ul><ul><li>Internet’s potential becoming evident </li></ul></ul><ul><ul><ul><li>Dot-coms = looked at its outward use to gain a competitive advantage </li></ul></ul></ul><ul><ul><ul><li>Most established firms initially used the Internet technology internally, building intranets to improve company processes </li></ul></ul></ul><ul><ul><ul><ul><li>Publishing e-forms </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Accompanying workflow processes </li></ul></ul></ul></ul>
    11. 11. Introduction Last 20 Years – Strategic Uses of IT cont. <ul><li>5 th edition (late ’90s) </li></ul><ul><ul><li>Use of the Internet for business underway </li></ul></ul><ul><ul><ul><li>Bursting of the dot com bubble </li></ul></ul></ul><ul><ul><ul><li>E-Business has become more reality based </li></ul></ul></ul><ul><ul><ul><li>Integration of the Internet into how companies work has proceeded </li></ul></ul></ul><ul><li>6 th edition (early ’00s) </li></ul><ul><ul><li>Theme = leveraging traditional operations by using the Internet to work more closely with others </li></ul></ul><ul><ul><ul><li>Innovations of the dot-coms created competitive challenges for ‘bricks and mortar’ firms </li></ul></ul></ul><ul><ul><ul><ul><li>Their ‘strike back’ is essentially the theme for this 6 th edition </li></ul></ul></ul></ul>
    12. 12. Introduction Last 20 Years – Strategic Uses of IT cont. <ul><li>7 th edition (2005) </li></ul><ul><ul><li>“ Something has changed” </li></ul></ul><ul><ul><ul><li>Especially with regards to the use of IT for competitive advantage </li></ul></ul></ul><ul><ul><li>Some may question IT’s ability to give companies a competitive edge but it is absolutely necessary for competitive parity (necessity?) </li></ul></ul><ul><ul><ul><li>Being used strategically: </li></ul></ul></ul><ul><ul><ul><ul><li>Inward </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Outward </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Across </li></ul></ul></ul></ul>
    13. 13. Introduction Whither the Internet Revolution? <ul><li>Internet frenzy peaked in 2000 </li></ul><ul><li>Is the Information Revolution dead? </li></ul><ul><ul><li>Not if history is any guide </li></ul></ul><ul><ul><ul><li>British Railway Revolution – mid 1800s </li></ul></ul></ul><ul><ul><ul><li>10 fold increase after the boom </li></ul></ul></ul><ul><ul><ul><ul><li>During boom = great excitement and small companies flourished </li></ul></ul></ul></ul><ul><ul><ul><ul><li>After = glamour gone. Business became serious and full of hard work </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Industry became orderly and profits began to reflect real returns </li></ul></ul></ul></ul><ul><ul><ul><li>Connecting industries </li></ul></ul></ul><ul><ul><ul><ul><li>Race for space followed by the ‘real deal’ </li></ul></ul></ul></ul>
    14. 14. Introduction Whither the Internet Revolution? cont. <ul><li>We are now in a period where organizations are re-architecting themselves around Internet technologies </li></ul><ul><ul><li>Tearing down old structures as they go </li></ul></ul><ul><li>Real gains will come when Internet technology adapts to organizations and people </li></ul><ul><ul><li>When the technology disappears and becomes part of life </li></ul></ul><ul><li>It will be ‘quiet’ compared to frenzy of ’99/00 but many think it will be a giant revolution </li></ul>
    15. 15. Introduction The Cheap Revolution <ul><li>CIOs are shifting from buying expensive proprietary products to buying cheap generic products </li></ul><ul><ul><li>“ Cheap Tech” </li></ul></ul><ul><li>Cost savings are compelling </li></ul><ul><ul><li>Google = runs on 100,000 cheap servers </li></ul></ul><ul><ul><ul><li>One breaks = discards </li></ul></ul></ul><ul><ul><ul><ul><li>Avoids expensive service contracts and in-house staff </li></ul></ul></ul></ul><ul><ul><li>“ Dellification” </li></ul></ul><ul><ul><ul><li>Moved from selling PCs to also selling servers, printers, storage devices…. </li></ul></ul></ul><ul><ul><li>“ Cheap” is occurring elsewhere: </li></ul></ul><ul><ul><ul><li>Labor – outsourcing to other countries </li></ul></ul></ul><ul><ul><ul><li>Film production – camcorders etc. </li></ul></ul></ul><ul><ul><ul><li>Software – Linux Vs. Microsoft </li></ul></ul></ul><ul><ul><ul><li>Telecommunications – Voice-over-IP… </li></ul></ul></ul>
    16. 16. Introduction Episode Two: Profitability Strikes Back <ul><li>Dot-coms became dot-bombs (dot-cons?) because they couldn’t generate profits </li></ul><ul><li>Episode One: The Dot-Com Menace </li></ul><ul><li>Episode Two: Profitability Strikes Back </li></ul><ul><ul><li>Whilst it has taken these so-called “old economy firms” longer to utilize the Web they realize that they must do so in a profit-making manner </li></ul></ul><ul><li>Use the Internet to complement your strategy, not replace your past way of serving customers nor disintermediate your channels </li></ul><ul><ul><li>Michael Porter, Harvard Business School </li></ul></ul>
    17. 17. GRAINGER Case example: Using the Internet to complement your strategy <ul><li>Distributes non-production products to companies through stocking locations all over the U.S. </li></ul><ul><ul><li>Customers who purchase on their website also purchase through traditional channels </li></ul></ul><ul><ul><ul><li>Physical sites make its online presence more valuable </li></ul></ul></ul><ul><ul><ul><ul><li>Customers who want fast delivery </li></ul></ul></ul></ul><ul><ul><ul><li>Ordering is less expensive and shipping is cheaper in bulk to stocking locations Vs. individual small shipments </li></ul></ul></ul><ul><ul><li>Continue publishing its paper catalogs </li></ul></ul><ul><ul><ul><li>It receives a surge of online orders every time it issues its paper catalog </li></ul></ul></ul>
    18. 18. Introduction Definitions <ul><li>‘ e’ = electronic </li></ul><ul><li>e-business </li></ul><ul><ul><li>Conducting business using telecommunications networks esp. Internet </li></ul></ul><ul><ul><li>Involves more than buying and selling </li></ul></ul><ul><li>e-commerce </li></ul><ul><ul><li>Conducting commerce (buying and selling) electronically using the Internet </li></ul></ul><ul><li>Note: IT definitions ‘evolve’ </li></ul>
    19. 19. E-Business Drivers <ul><li>Key Components that have accelerated the rapid growth and acceptance of e-business: </li></ul><ul><ul><li>Wide access to a public network </li></ul></ul><ul><ul><li>Standard communication protocol </li></ul></ul><ul><ul><li>Standard user interface </li></ul></ul><ul><li>E-business applications run over the Internet, drastically reducing access and communications costs </li></ul><ul><ul><li>Pre Internet – 95% of Fortune 500 used EDI Vs. 2% of all U.S. companies </li></ul></ul><ul><li>With standardized communication protocols and user interfaces, implementation and training costs are far lower </li></ul><ul><li>As a result, a much broader set of users and firms has access to the systems, allowing rapid growth </li></ul>
    20. 20. Does IT Still Matter? <ul><li>“ IT Doesn’t Matter” – article by Nicholas Carr in Harvard Business Review May 2003 </li></ul><ul><ul><li>Controversial and now a book </li></ul></ul><ul><ul><li>Bottom line = IT doesn’t matter anymore, at least not strategically </li></ul></ul><ul><ul><ul><li>IT is an infrastructure technology, like rail, electricity, telephone etc. </li></ul></ul></ul><ul><ul><ul><ul><li>Such technology can create a strategic advantage for an individual firm at the beginning of its life cycle when it is expensive and risky </li></ul></ul></ul></ul><ul><ul><ul><li>Carr = IT is now at the end of buildout and is neither proprietary or expensive </li></ul></ul></ul><ul><ul><ul><ul><li>= A commodity which is available to anyone and won’t give any individual firm a competitive advantage </li></ul></ul></ul></ul>
    21. 21. Does IT Still Matter? cont. <ul><li>Reached the end of its buildout: </li></ul><ul><ul><li>Power of IT now outstrips the needs of business </li></ul></ul><ul><ul><li>IT prices have dropped = now affordable </li></ul></ul><ul><ul><li>Capacity of Internet has caught up with demand (fibre surplus) </li></ul></ul><ul><ul><li>Many vendors want to be seen as utilities </li></ul></ul><ul><ul><li>Investment bubble has burst </li></ul></ul><ul><li>When an infrastructure technology reaches the end of its buildout, it simply becomes a cost of doing business </li></ul><ul><li>Although IT is necessary for competitiveness, Competitive advantage comes from the firm’s business model </li></ul>
    22. 22. Does IT Still Matter? cont. <ul><li>Management of IT should become “boring” focussing on: </li></ul><ul><ul><li>Manage the risks </li></ul></ul><ul><ul><ul><li>Focus on vulnerabilities (which are more common with open systems) rather than opportunities </li></ul></ul></ul><ul><ul><li>Keep costs down </li></ul></ul><ul><ul><ul><li>Greatest risk = overspending, so only pay for use and limit upgrading </li></ul></ul></ul><ul><ul><ul><ul><li>Don’t update PCs when not needed </li></ul></ul></ul></ul><ul><ul><li>Stay behind the technology leaders </li></ul></ul><ul><ul><ul><li>But not too far behind! </li></ul></ul></ul><ul><ul><ul><ul><li>Delay investments until there are standards and best practices and prices drop </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Only innovate when risks are low </li></ul></ul></ul></ul>
    23. 23. Does IT Still Matter? cont. <ul><li>This ‘negative’ view deals with individual firms = losing competitive advantage </li></ul><ul><li>Infrastructure technology brings its greatest economic and social benefits to all once it has become a shared infrastructure </li></ul><ul><ul><li>= what IT is becoming </li></ul></ul><ul><li>The debate is on </li></ul><ul><ul><li>Many other views </li></ul></ul><ul><ul><li>Is he right? Regardless = has prompted some important discussions in Board Rooms etc. because executives need to understand the underpinnings of IT to know how to guide it </li></ul></ul><ul><ul><ul><li>IT is one of their strategic resources, besides people and $ for working inward, outward and across </li></ul></ul></ul>
    24. 24. Working Inward: Business-to-Employee Building an Intranet <ul><li>The primary e-business way to reach employees is via ‘Intranets’ </li></ul><ul><ul><li>Intranets are private company networks that use Internet technologies and protocols, and possibly the Internet itself </li></ul></ul><ul><li>Benefits of using intranets: </li></ul><ul><ul><li>Wider access to company information </li></ul></ul><ul><ul><li>More efficient and less expensive systems development </li></ul></ul><ul><ul><li>Decreased training (due to browser interface) </li></ul></ul><ul><ul><li>By using an intranet’s open-system architecture, companies can significantly decrease the cost of providing companywide information and connectivity </li></ul></ul>
    25. 25. Working Inward: Business-to-Employee Building an Intranet cont. <ul><li>Benefits cont. </li></ul><ul><ul><li>Investments in a intranet (open) = significantly less $$ than a proprietary network </li></ul></ul><ul><ul><li>The link to the Internet allows companies to expand intranets worldwide easily and cheaply </li></ul></ul><ul><ul><ul><li>Significant Benefit = unthinkable before the Internet! </li></ul></ul></ul><ul><ul><li>Because an intranet uses the browser interface (and internet ‘protocols’ /technology) = users do not need extensive training on different products </li></ul></ul><ul><ul><ul><li>To a certain extent = applies to ‘all’ products today </li></ul></ul></ul><ul><ul><li>Companies only need to record information in one place, where it can be kept up-to-date for access by all employees no matter where in the world they are located </li></ul></ul>
    26. 26. WORKING INWARD: Business to Employee
    27. 27. Working Inward: Business-to-Employee Building an Intranet <ul><li>Due to the ease with which Web sites can be created, many employees have (did?) build their own, leading to a proliferation of sites with company information </li></ul><ul><ul><li>Deciding how much control of the systems should be decentralized </li></ul></ul><ul><li>Proposed solutions </li></ul><ul><ul><li>Create a corporate portal to act as the gateway to the firm’s internal resources, information, and Internet services </li></ul></ul><ul><ul><ul><li>Microsoft, KPMG, Dell etc. </li></ul></ul></ul><ul><ul><li>Develop separate departmental or divisional portals, such as sales, HR, operations, and finance portals which are linked to form a corporate portal </li></ul></ul>
    28. 28. GE POWER SYSTEMS Case example: Building an Intranet <ul><li>Chairman surveyed sales force (2001) </li></ul><ul><ul><li>Found they were spending more time in the office searching for information than they were out with their customers </li></ul></ul><ul><li>GE Power Systems answered the challenge by building a Web-based sales portal for its sales-people </li></ul><ul><ul><li>Main data feeds from existing Oracle etc. systems </li></ul></ul><ul><ul><ul><li>Sales, parts, pricing, inventory, customers etc. </li></ul></ul></ul><ul><ul><li>Also had a news feed from outside </li></ul></ul><ul><ul><li>Flexible to include more types of information and access to more applications </li></ul></ul><ul><li>Single point of entry </li></ul>
    29. 29. Working Inward: Business-to-Employee Fostering a Sense of Belonging <ul><li>Intranets are evolving into very important enterprise structures </li></ul><ul><ul><li>In some enterprises, the intranet is seen as the enterprise </li></ul></ul><ul><ul><ul><li>Videos of executives – vision and mission </li></ul></ul></ul><ul><ul><ul><li>Internal forms, rules and processes </li></ul></ul></ul><ul><ul><ul><li>Need to file an expense report? </li></ul></ul></ul><ul><li>Can also be seen as ‘cold’ </li></ul><ul><li>Can provide the foundation for creating a sense of belonging by giving a means of communicating and creating communities </li></ul><ul><ul><li>Care of employees = one of the most important things enterprises do! </li></ul></ul>
    30. 30. <ul><ul><li>Use of Internet to help an impoverished province of Canada </li></ul></ul><ul><ul><ul><li>Traditional industries ‘gone’ </li></ul></ul></ul><ul><ul><li>The Challenge </li></ul></ul><ul><ul><li>The Solution </li></ul></ul><ul><ul><ul><li>Wire Nova Scotia (WiNS) </li></ul></ul></ul><ul><ul><ul><ul><li>Co-ordinate 67 community access sites </li></ul></ul></ul></ul><ul><ul><li>Building an Online Community </li></ul></ul><ul><ul><ul><li>General Conferences </li></ul></ul></ul><ul><ul><ul><li>Personal Conferences </li></ul></ul></ul><ul><ul><ul><li>Regional Conferences </li></ul></ul></ul><ul><ul><ul><li>Coordinator Conferences </li></ul></ul></ul>WIRE NOVA SCOTIA Case example: Fostering a Sense of Belonging
    31. 31. Working Outward: Business-to-Customer <ul><li>In most industries companies need sophisticated computer systems to compete </li></ul><ul><ul><li>Airlines, hotels, rental car companies = a sophisticated reservation system (theirs or someone else’s) is a must </li></ul></ul><ul><ul><li>Similar ‘musts’ in other industries </li></ul></ul><ul><ul><ul><li>Wholesale = automated order entry and distribution </li></ul></ul></ul><ul><ul><ul><li>Finance = ATMs., trading and settlement… </li></ul></ul></ul><ul><li>As industry leaders increase the sophistication of their systems to improve </li></ul><ul><ul><li>Quality, service innovation and speed </li></ul></ul><ul><li>Competitors must do the same or find themselves at a disadvantage </li></ul>
    32. 32. Working Outward: Business-to-Customer Jumping to a New Experience Curve <ul><li>Using IT (or any technology) as the basis for a product or service can, in some cases, be viewed as moving up a series of experience curves </li></ul><ul><li>More experience leads to a set of connected curves Vs. one continuous learning curve </li></ul><ul><li>Each curve represents a new technology or combination thereof in a product or service as well as in its manufacture and/or support </li></ul><ul><li>Moving to a new curve requires substantial investment in a new technology </li></ul>
    33. 33. THE SHIPPING INDUSTRY Case Example: Jumping to a New Experience Curve
    34. 34. CISCO SYSTEMS and UPS Case Example: Jumping to a New Experience Curve <ul><li>In the late 1990s Cisco committed itself to manufacturing products within 2 weeks of order </li></ul><ul><ul><li>BUT = could not guarantee delivery </li></ul></ul><ul><li>Turned over its European supply chain to UPS Supply Chain Solutions (UPS SCS) </li></ul><ul><ul><li>Uses UPS system to find the best shipper to move the package from the Netherlands centre to the customer </li></ul></ul><ul><ul><li>The systems of the two companies have become increasingly linked </li></ul></ul><ul><ul><ul><li>Each movement of product is recorded in both systems </li></ul></ul></ul><ul><li>Handles over 1m boxes a year </li></ul><ul><ul><li>Because UPS can ensure reliable transit times, Cisco is able to now promise delivery times for its European customers </li></ul></ul>
    35. 35. Working Outward: Business-to-Customer The Emergence of “Electronic Tenders” <ul><li>Initially IT has been embedded in products and services for its computational capabilities </li></ul><ul><ul><li>e.g. in cars and elevators to make them operate more efficiently </li></ul></ul><ul><li>Now = allows product/service to be “tended” i.e. cared for, attended to, or kept track of by another computer </li></ul><ul><ul><li>e.g. vehicle diagnostics monitored by car dealer </li></ul></ul><ul><ul><li>Packages / luggage etc. with bar codes = able to be tracked </li></ul></ul><ul><ul><li>Potential uses are endless and we are just at the beginning </li></ul></ul><ul><li>Options are endless but the goal is still to get closer to the customer </li></ul>
    36. 36. Working Outward: Business-to-Customer Getting Closer to Customers <ul><li>Business-to-consumer e-business is the most widely reported form of e-business. </li></ul><ul><li>Nearly every type of product can now be purchased online: books, CDs, flowers etc. </li></ul><ul><ul><li>Many success stories – Dell, Cheap Tickets, ETrade …. </li></ul></ul><ul><li>Success is not easily achieved: </li></ul><ul><ul><li> had its business viability questioned for a long time </li></ul></ul><ul><ul><li>Levi Strauss, despite encouraging figures, quit selling jeans over the Internet “…complex proposition and management had better uses for company funds” </li></ul></ul><ul><li>Advantages are numerous and seem obvious (Figure 3-4) </li></ul><ul><li>Potential problems are also numerous but not so obvious (Figure 3-5) </li></ul>
    37. 37. WORKING OUTWARD: Business to Customer
    38. 38. WORKING OUTWARD: Business to Customer
    39. 39. Working Outward: Business-to-Customer Getting Closer to Customers cont. <ul><li>Use of the Internet has grown more sophisticated </li></ul><ul><li>Customer Relationship Management (CRM) </li></ul><ul><ul><li>Involves using IT to know more about customers (and non-customers?) </li></ul></ul><ul><ul><ul><li>Whether you visit their website, call them (home, office, mobile) or buy something – the firm is often keeping track and combining that information to create a profile of you </li></ul></ul></ul><ul><ul><ul><li>Followed on from ERP </li></ul></ul></ul><ul><ul><ul><ul><li>ERP focussed on internal data </li></ul></ul></ul></ul><ul><ul><ul><ul><li>CRM focuses on customer data </li></ul></ul></ul></ul><ul><ul><li>Boon or bane = depends on how intrusive you think they are </li></ul></ul><ul><ul><ul><li>Great useful information Vs. </li></ul></ul></ul><ul><ul><ul><li>Invasion of privacy </li></ul></ul></ul><ul><ul><ul><ul><li>Privacy – protection laws in many countries </li></ul></ul></ul></ul>
    40. 40. Working Outward: Business-to-Customer Getting Closer to Customers cont. <ul><li>Successful selling over the Internet entails much more than just setting up a Web site and taking orders </li></ul><ul><ul><li>It involves organizing the entire value chain around the Internet </li></ul></ul><ul><li>The E-Business Model </li></ul><ul><ul><li>Redefining Customer Value </li></ul></ul><ul><ul><ul><li>“ On-demand”: reduces the time it takes to respond to customer requests </li></ul></ul></ul><ul><ul><ul><li>Convenience: one stop shopping plus single point of contact. Online business allows gathering and managing customer information (to serve the customer) </li></ul></ul></ul><ul><ul><ul><li>Access to a wide range of competitive prices and sellers for products </li></ul></ul></ul><ul><ul><ul><li>Note: as in the ‘real world’; the highest volume sellers do not always have the lowest price: </li></ul></ul></ul><ul><ul><ul><ul><li>Prices are offset by branding, awareness and customer trust </li></ul></ul></ul></ul>
    41. 41. Working Outward: Business-to-Customer Getting Closer to Customers cont. <ul><li>The Internet is not only used to sell to customers online. It is also used to provide services to companies </li></ul><ul><ul><li>Sometimes it is can be difficult to know which is more valuable – the product or the service </li></ul></ul><ul><li>The current focus is on staying in closer contact with customers, understanding them better, and eventually, becoming customer driven by delivering personalized products and service </li></ul>
    42. 42. SEMCO Case Example – Using the Internet to get Closer to Customers <ul><li>Brazilian heavy equipment manufacturer with an ‘interesting’ management attitude/structure </li></ul><ul><ul><li>Letting employees ‘self manage’ and following their ideas with $ </li></ul></ul><ul><li>First = moved into services and more recently into the marketspace of e-business services over the Internet </li></ul><ul><ul><li>Now = even teaming with a virtual trade show company to host virtual trade fairs for companies too small to have one on their own </li></ul></ul><ul><li>All of this change has occurred by following the employees </li></ul><ul><ul><li>When they have a good idea = Semco management is likely to provide the funding to test it out </li></ul></ul><ul><li>Unusual company, however its forays into using the Internet to expand its business provide lessons for others </li></ul>
    43. 43. Working Outward: Business-to-Customer Being an Online Customer <ul><li>Companies large and small are transacting business via the Internet </li></ul><ul><li>Some (still?) use it as their main means of business, even after the dot-com crash </li></ul>
    44. 44. TerenceNet Case Example – A Day in the Life of an E-Lancer <ul><li>E-business consulting, development, and research firm for small/medium businesses </li></ul><ul><li>Much of its work is procured from </li></ul><ul><ul><li>Website that puts e-business freelancers in contact with clients </li></ul></ul><ul><ul><ul><li>Charges 10% commission </li></ul></ul></ul><ul><ul><ul><li>Bid on projects </li></ul></ul></ul><ul><ul><ul><li>Have private conversations with potential clients </li></ul></ul></ul><ul><ul><ul><li>Even able to sub-contract to others (become a client!) </li></ul></ul></ul><ul><ul><li>Trust involved on both sides </li></ul></ul><ul><li>When you sign up on Elance, it’s like joining a community </li></ul>
    45. 45. Working Across: Business-to-Business <ul><li>Streamlining processes that cross company boundaries is the next big management challenge </li></ul><ul><ul><li>Companies have spent a lot of time and effort streamlining their internal processes, but their efficiencies often stop at their corporate walls </li></ul></ul><ul><li>Working across business takes many forms including: </li></ul><ul><ul><li>Working with ‘co-suppliers’ </li></ul></ul><ul><ul><li>Working with customers in a close mutually dependent relationship </li></ul></ul><ul><ul><li>Building a virtual enterprise, in fact, one that might evolve into an e-marketplace </li></ul></ul>
    46. 46. Working Across: Business-to-Business <ul><li>Businesses have long used IT to reduce costs and time of inter-organizational transactions, for example: </li></ul><ul><ul><li>Inter-organizational Systems (IOS) </li></ul></ul><ul><ul><ul><li>Reservation systems </li></ul></ul></ul><ul><ul><ul><ul><li>Sabre (AA) </li></ul></ul></ul></ul><ul><ul><ul><li>Electronic funds transfer systems </li></ul></ul></ul><ul><ul><ul><ul><li>Cirrus (Green Machine) </li></ul></ul></ul></ul><ul><ul><li>Electronic Data Interchange Systems (EDI) </li></ul></ul><ul><ul><ul><li>Transmission, in standard syntax, of data for business transactions between computers of independent organizations </li></ul></ul></ul>
    47. 47. Working Across: Business-to-Business Coordinating with Co-suppliers <ul><li>Collaborating with non-competitors is a type of working across </li></ul><ul><li>Example – two food manufacturers might have the same customers (supermarkets and other retailers) but do not compete with each other </li></ul><ul><li>Lack of convenient ways to share information quickly and easily has deterred co-suppliers from working together </li></ul><ul><ul><li>Internet takes away this deterrent </li></ul></ul>
    48. 48. GENERAL MILLS & LAND OF LAKES Case Example – Coordinating with Co-suppliers <ul><li>Seven largest US food companies supply about 40% of supermarket shelf space for dry goods </li></ul><ul><ul><li>Use own trucks etc. </li></ul></ul><ul><li>Only supply 15% of refrigerated </li></ul><ul><ul><li>One truck for several supermarkets </li></ul></ul><ul><ul><ul><li>Less efficient, delays etc. = unhappy clients </li></ul></ul></ul><ul><li>Combine their deliveries on General Mills trucks </li></ul><ul><ul><li>Now = looking into integrating their order taking and billing processes </li></ul></ul>
    49. 49. Working Across: Business-to-Business Establishing Close and Tight Relationships <ul><li>Strategic use of IT and the Internet has moved to the most difficult area = working across companies </li></ul><ul><ul><li>Having relationships with various players in one’s business ecosystem </li></ul></ul><ul><ul><ul><li>Banks, advertising agencies, suppliers, distributors, retailers, even competitors </li></ul></ul></ul><ul><ul><ul><li>Such relationships often have accompanying linking information systems </li></ul></ul></ul>
    50. 50. Working Across: Business-to-Business Establishing Close and Tight Relationships cont. <ul><li>Need to determine what level of systems integration they want: </li></ul><ul><ul><li>Loose = provide ad hoc access to internal information </li></ul></ul><ul><ul><ul><li>Business processes remain distinct </li></ul></ul></ul><ul><ul><ul><li>Such limited integration requires little risk or cost </li></ul></ul></ul><ul><ul><li>Close = two parties exchange information in a formal manner </li></ul></ul><ul><ul><ul><li>Leads to greater benefits, so there is greater impetus to make the relationship work </li></ul></ul></ul><ul><ul><ul><li>Risks increase because confidentialities are shared </li></ul></ul></ul><ul><ul><ul><li>Costs are also higher </li></ul></ul></ul><ul><ul><li>Tight = two parties share at least one business process </li></ul></ul><ul><ul><ul><li>Most risky – business critical and the most costly to integrate </li></ul></ul></ul><ul><ul><ul><ul><li>Due to high costs and risks = can only have a few!! </li></ul></ul></ul></ul><ul><ul><ul><li>Where does one organizational boundary begin and the other end? = Intermeshed! </li></ul></ul></ul>
    51. 51. WORKING OUTWARD: Business to Business
    52. 52. SARA LEE Case Example: Close relationship becoming a tight one <ul><li>Sara Lee was one of the first to initiate scan-based trading with large retailers that sell its baked goods </li></ul><ul><li>Using this technology, Sara Lee does not get paid until a loaf of bread is sold and passes through the point-of-sale scanner </li></ul><ul><li>The technology requires drawing from a single database hosted by a third party </li></ul><ul><li>Its use has improved the quality of delivery people, lowered costs, and increased revenues </li></ul><ul><li>Note: Sara Lee requires retailers to adhere to a number of prerequisites – to demonstrate that they are good trading partners </li></ul><ul><li>Look at how it is administered: </li></ul><ul><ul><li>‘ Seven prerequisites for SBT’ </li></ul></ul><ul><ul><li>Management structure to support </li></ul></ul>
    53. 53. Working Across: Business-to-Business Becoming a Customer-Centric Value Chain <ul><li>A company’s value chain consists of: </li></ul><ul><ul><li>Upstream supply chain </li></ul></ul><ul><ul><ul><li>Working with its suppliers of raw materials and parts </li></ul></ul></ul><ul><ul><li>Downstream demand chain </li></ul></ul><ul><ul><ul><li>Working with its distributors and retailers to sell its products and services to end customers </li></ul></ul></ul><ul><li>Traditionally most companies make-to-stock = build products / create services and then “push” them to customers </li></ul><ul><ul><li>Supply-Push world </li></ul></ul><ul><li>Today, we are seeing the rise of the reverse – a demand-pull world where a customer’s order triggers the creation of a customized product or service the customer has defined </li></ul>
    54. 54. DELL COMPUTER Case Example: Demand - Pull <ul><li>Dell is the foremost example of the demand-pull business model </li></ul><ul><li>Customers configure their on PCs on Dell’s Website, and once an order is initiated, Dell’s suppliers can see the ordering information and production schedule on Dell’s extranet </li></ul><ul><li>In fact, their production systems grab this information automatically; as a result, Dell’s extranet has become a private exchange </li></ul><ul><li>Dell is even working to give suppliers two tiers down access to customer order information, so they can react to changes even faster </li></ul>
    55. 55. Working Across: Business-to-Business Becoming a Customer-Centric Value Chain cont. <ul><li>Pros and Cons of Demand-Pull </li></ul><ul><ul><li>Value-chain transparency = should reduce the number of duplicate orders </li></ul></ul><ul><ul><ul><li>10,000 memory chips Vs. 30,000 ‘ordered’ due to shortage </li></ul></ul></ul><ul><ul><li>Creating private exchanges such as Dell changes the level of co-operation among firms </li></ul></ul><ul><ul><li>Con = infrastructure </li></ul></ul><ul><ul><ul><li>Manufacturer’s becomes its suppliers – binding them even tighter </li></ul></ul></ul><ul><ul><ul><li>Requires TRUST </li></ul></ul></ul><ul><ul><li>Becoming customer centric is not easy, especially for supply-push companies </li></ul></ul><ul><li>The promise of CRM is alluring </li></ul><ul><ul><li>Aims to help companies shift their attention from managing their operations to satisfying their customers </li></ul></ul>
    56. 56. Working Across: Business-to-Business Getting Back-End Systems in Shape <ul><li>Most, if not all, B2B systems must integrate with existing back-end systems which has proved to be particularly difficult </li></ul><ul><li>Challenge </li></ul><ul><ul><li>Variety of platforms </li></ul></ul><ul><ul><li>Incompatible </li></ul></ul><ul><li>Approach </li></ul><ul><ul><li>Purchase ‘new’ systems </li></ul></ul><ul><ul><ul><li>Database Management Systems (DBMS) </li></ul></ul></ul><ul><ul><ul><li>ERP Systems </li></ul></ul></ul><ul><ul><li>Extranet = securely share with suppliers, partners etc. </li></ul></ul><ul><li>Goal = extend the company’s back-end systems to reengineer business processes external to the company </li></ul>
    57. 57. Conclusion <ul><li>Over the years a few innovative companies have used IT for strategic advantage </li></ul><ul><ul><li>‘ Models’ but many companies did not have the resources or skills to follow their example </li></ul></ul><ul><ul><li>With the growth of the Internet and development of e-business, IT has become a strategic tool in every industry </li></ul></ul><ul><li>Looking for cohesion of often dispersed employees? </li></ul><ul><ul><li>Intranets and Portals </li></ul></ul><ul><li>Increasingly customer centric view has many using IT in working across </li></ul><ul><ul><li>Value chains are looking to shift from supply-push to demand-pull </li></ul></ul><ul><li>As IT continues to evolve, so do its strategic uses </li></ul>