Week 4
Monday, September 19
IT Leadership
• Strategic IT
• e-Business Model
• IT Planning
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
1
IT Leadership
• Role of CIO…
– Changes with advances in IT that open new opportunities
– Determined by the business' vision, mission and strategic
plan to capitalize on opportunities
– Shaped by the business plan to capture opportunities
– Specified by the adoption and the business' expectations of
IT
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
2
American Airlines and SABRE:
Leveraging IT for a Competitive Advantage
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
3
American Airlines and SABRE:
Summary
• Accurate passenger inventories allowed American to manage
under/overbookings to jointly optimize passenger service and
capacity utilization levels
• Reduced labor content in the reservations process while
increasing the productivity of the remaining reservation
personnel (efficiency)
• Increased their presence in current markets
• Increased their presence in markets not served
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
4
American Airlines
IT and Electronic Commerce
• Level 0 - No automation between the organization and its
external entities (internal operations control)
• Level 1 - Telecommunication link between the organization
and its customers (data sharing)
• Level 2 - Telecommunication links between the organization,
and its customers and suppliers (process and information
integration)
• Level 3 - Strategic alliances formed with competitors to offer
products and services to customers (electronic market
facilitation)
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
5
American Airlines and SABRE
Level 0
Level 1:
Retail Automation
Travel
agents and
corporate
offices
Level 2: Co-hosting
Travel
agents and
corporate
offices
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
6
American Airlines and SABRE
Level 3: Strategic Alliances
Co-host
Travel
agents,
corporate
offices,
public
Codeshare Alliances
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
7
American Airlines Codeshare Alliances
AA Codeshare Alliances
A codeshare is an agreement where American Airlines purchases seats on selected
routes and markets them as an American Airline flight. Codeshare alliances allow
American to offer our customers access to hundreds of international and domestic
U.S. destinations, while ensuring consistent, coordinated, and high quality
passenger service.
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
8
Horizontal Integration
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
9
Star Alliance
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
10
Star Alliance
"One-stop" shopping
Star Alliance members
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
11
Star Alliance
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
12
United and Customer Loyalty
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
13
Star Alliance
Loyalty Benefits
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
14
Star Alliance
Loyalty Benefits
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
15
B2B and Supply Chain
• Coordinating suppliers
– From EDI (electronic data interchange) to the Internet
• Establishing close and tight relationships
– Loose integration – ad hoc and occasional
– Close integration – formal exchange of information between two
businesses
– Tight integration – sharing a business processes (e.g., UPS)
• Becoming a customer-centric value chain (virtual enterprise)
– Risk sharing
– Supply chain (suppliers) vs. demand chain (distributors and
retailers)
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
16
Boeing Aircraft and Suppliers:
Assembling an Aircraft
Boeing 787
Risk sharing partners
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
17
Boeing and Primary Vendors
Main
Location
787 Work Statement
Boeing Commercial Airplanes (announced
Nov. and Dec. 2003)
Washington
Airplane development, integration, final assembly, program leadership
Alenia/Vought Aircraft Industries (announced
Nov. 2003)
Italy, Texas
Horizontal stabilizer, center fuselage, aft fuselage
Boeing Fabrication (announced Nov. 2003)
Washington,
Canada,
Australia
Vertical tail assembly, movable trailing edges, wing-to-body fairing, interiors
Spirit Aerosystems Inc. (announced as Boeing
- Wichita Nov. 2003; Apr. 2004)
Kansas,
Oklahoma
Fixed and movable leading edges, flight deck, part of forward fuselage, engine pylons
Fuji Heavy Industries (announced Nov. 2003)
Japan
Center wing box, integration of the center wing box with the main landing gear wheel well
Kawasaki Heavy Industries (announced Nov.
2003)
Japan
Main landing gear wheel well, main wing fixed trailing edge, part of forward fuselage
Mitsubishi Heavy Industries (announced Nov.
2003)
Japan
Wing box
Hamilton Sundstrand (announced Feb. 2004,
March 2004, July 2004, Sep. 2004)
Connecticut
Auxiliary power unit, environmental control system, remote power distribution units, electrical power generating
and start system, primary power distribution, nitrogen generation, ram air turbine emergency power
system, electric motor hydraulic pump subsystem
Rockwell Collins (announced Feb. 2004)
Iowa
Displays, communications/ surveillance systems
Honeywell (announced Feb. 2004, July 2004)
Arizona
Navigation, maintenance/crew information systems, flight control electronics; exterior lighting
Smiths (announced Feb. 2004, Jun. 2004)
United Kingdom
Common core system, landing gear actuation and control system, high lift actuation system
Goodrich ( announced March 2004; April
2004, June 2004, Nov. 2004, Dec.
2004)
North Carolina
Fuel quantity indicating system, nacelles, proximity sensing system, electric brakes, exterior lighting, cargo
handling system
Messier-Dowty (announced March 2004)
France
Landing gear structure
Dassault Systèmes (announced Feb. 2004)
France
Global collaboration tools/software
Boeing Interiors Responsibility Center
(announced March 2004)
Washington
Interior
FR-HiTemp (announced March 2004)
United Kingdom
Pumps and valves
Rolls-Royce (announced April 2004)
United Kingdom
Engines
Company/Business Unit
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
18
General Electric (announced April 2004)
Ohio
Engines
Boeing Propulsion Systems Division (announced April 2004)
Washington
Propulsion systems engineering and procurement services
Moog Inc. (announced May 2004)
New York
Flight control actuators
Kidde Technologies (announced May 2004)
North Carolina
Fire protection system
Toray Industries (announced May 2004)
Washington
Prepreg composites
Kaiser Electroprecision (announced June 2004)
California
Pilot control system
Thales (announced July 2004, Aug. 2004)
France
Electrical power conversion, integrated standby flight display
Labinal (announced July 2004)
France
Wiring
Parker Hannifin (announced Sep. 2004)
Ohio
Hydraulic subsystem
Messier-Bugatti (announced Nov. 2004)
France
Electric brakes
Latecoere (announced Nov. 2004)
France
Passenger doors
Monogram Systems (announced Nov. 2004)
California
Water and waste system
Air Cruisers (announced Nov. 2004)
New Jersey
Escape slides
Delmia Corp. (announced Nov. 2004)
Michigan
Software
Intercim (announced Nov. 2004)
Minnesota
Software
Panasonic (announced Dec. 2004)
Japan
Cabin services system
Bridgestone (announced Dec. 2004)
Japan
Tires
Ultra Electronics Holdings (announced Dec. 2004)
United Kingdom
Wing ice protection system
GKN Aerospace (announced Dec. 2004)
United Kingdom
Composite mat for the wing ice protection system
Korry Electronics (announced Jan. 2005)
Washington
Flight-deck control panels
Ipeco (announced April 2005
United Kingdom
Flight-deck seats
Diehl Luftfahrt Elektronik (announced April 2005)
Germany
Main cabin lighting
Jamco (announced Apr. 2005, May 2005)
Japan
Lavatories, flight deck interiors, flight deck door and bulkhead assembly
Northwest Composites Inc. (announced April 2005)
Washington
Sidewalls, window reveals, cargo linings, door linings and door surrounds
Securaplane (announced April 2005)
Arizona
Wireless emergency lighting system
Donaldson Company, Inc. (announced May 2005)
Minnesota
Air purification system
Astronautics Corp. of America (announced May 2005)
Wisconsin
Electronic Flight Bag (EFB)
CTT Systems (announced August 2005)
Sweden
Zonal Drying system
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
19
Vertical Integration
Consumer
Retailer
(Distributor)
Supplier
(manufacturer)
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
20
B2C and Vertical Integration: United.com
Air Transportation

Car Rental

Hotel
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
21
B2C and Self-Service: Travelocity.com
Customer specifies
origin, destination
and dates
Travelocity finds and
presents airfare
alternatives
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
22
B2B: Vision Service Plan
VSP, doctors and
patients
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
23
Strategic IT Planning
• Alignment of the IT strategy to the business
strategy
• Continuous planning vs. periodic planning
• IT portfolio vs. projects (6 months maximum)
• Robust IT infrastructure
• Enterprise planning
• Continuous improvement and reengineering
• Top-down vs. bottom-up, centralized vs.
decentralized
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Rapid advances
in IT
24
Ad Hoc Planning
Longer tongue
Longer bill
Strengthened neck
Volume increases by its
cube (v3), area by its
square (a2)
Counterbalance
weight
Larger wings
Strengthen legs
Duck Tongues: A Tale of Redesigning the Duck
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
25
Traditional ‘Bricks and Mortar’ Business
Model
Corporate Headquarter
Suppliers
Distribution Center
Retail Store
Store
Food
Mart
Warehouse
Convenience Store
Manufacturer
Consumer
Store
Food
Mart
Store
Food
Mart
Convenience Store
Convenience Store
Retail Store
Retail Store
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
26
E-Business:
An IT-Enabled Business Model
• Business model represents a
– “Clearly stated plan for adding economic value by
applying know-how to a set of resources in order to
create a marketable product or service” (Miles, Snow and
Miles, 2000)
• E-Business, an IT-enabled
business model
– Electronic network-based
(Internet)
• Information primary
resource
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
27
Transitioning to e-Business
MIT90 Framework
Structure
Vision
Strategy
Management
Processes
Technology
Individuals &
Roles
Changes to one component require compensatory (or retaliatory)
changes to the others
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
28
Traditional Business Model
Organization Structure
Hierarchical
Communication Flows
Functional
Area
Organization
Silos
Functional
Area
Functional
Area
Each functional area’s performance tends to be
optimized within itself
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
29
Paradigm Shift
Defines the way problems and
solutions are viewed and developed
Traditional Business
Models
Physical Resource
Management
e-Business Models
Paradigm
shift
• Efficiency
• Logistics
• Physical presence
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Information
Management
• Exploitation and leveraging
of information and
knowledge (factual,
procedural, tacit)
• Virtual organizations
(partnerships and alliances)
• Internet-enabling
technologies
30
e-Business Model
Organization Structure
Organization
Organizational boundaries
less discernible
Functional
Area
Functional
Area
Direction and vision
Functional
Area
Shared knowledge
The entire organization’s performance is optimized
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
31
e-Business Transition Model
Structure
Technology
Management
Processes
Successful
E-Business
Model
Strategy
Strategy incorporates a
vision of technology
Individuals
and Roles
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
32
Strategy and Organization Structure
• Responding to the environment
– Opportunities
– Threats
Create a responsive
organization structure
"If you have to react, it's too late"
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
33
Planning Techniques
•
•
•
•
•
•
•
Stages of Growth: Nolan's Stages Theory
Rockart's Critical Success Factors (CSF)
Porter's Competitive Forces Model
Porter's Value Chain Analysis
e-Business value matrix
Linkage analysis planning
Scenario planning
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
34
Nolan's Stage Theory
• All organizations go through four stages for IT adoption
– Introduction
– Contagion
– Control
IT is recognized as a resource
– Integration
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
35
Nolan's Stages Theory
Investment
in IT
Integration
Control
Contagion
IT Resource
Introduction
Time
Stage 1
Stage 2
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Stage 3
Stage 4
36
Critical Success Factors (CSF)
• “Critical success factors thus are, for any business, the limited
number of areas in which results, if they are satisfactory, will
ensure successful competitive performance for the
organization. They are the few key areas where 'things must
go right' for the business to flourish. If results in these areas
are not adequate, the organization's efforts for the period will
be less than desired. ... As a result, the critical success factors
are areas of activity that should receive constant and careful
attention from management.”
Rockart, 1979
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
37
Prime Sources of CSFs
• Industry
– Determined by the characteristics of the industry
• Competitive strategy and industry position
– Actions of each organization within the scope of this
industry
• Environmental factors
– Environmental events that affect the industry and
organization (e.g., the economy)
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
38
Prime Sources of CSFs
• Temporal factors
– Internal considerations
– Activities significant for the success of an organization for
a particular period of time because they are below the
threshold of acceptability at that time
• Managerial position
– Functions and responsibilities of each manager
Bullen and Rockart, 1981
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
39
Classification of CSFs: Three Dimensions
• Internal versus External
– Internal: Deal with issues and situations within the
manager's control
– External: Pertain to situations generally less under the
manager's control
• Monitoring versus Building
– Monitoring: Focuses on tracking and guiding the
organization's performance (i.e., control)
– Building: Aimed at adapting the organization to a
perceived new environment (i.e., planning)
• Sources of CSFs
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
40
Five Sources of CSFs
•
•
•
•
•
Industry
Strategy
Environment
Temporal
Position (of manager)
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
41
Major Dimensions of CSFs
Sources
Interest rates
• Industry
• Strategy
New skill
acquisition
• Environment
• Temporal
Building
(Innovation)
• Position
Monitoring (Control)
External
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Internal
42
Benefits of CSF Approach
• Helps managers determine on which factors they should focus
their attention
– Ensures those factors will receive careful and continuous
management scrutiny
• Forces managers to develop good measure for those factors
and to seek reports on each of the measures
• All a clear definition of the amount of information that must be
collected by the organization and limits the costly collection of
more data than necessary
• Moves the organization away from the trap of building its
reporting and information system primarily around data that
are easy to collect.
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
43
Benefits of CSF Approach (Cont.)
• Acknowledges that some factors are temporal and that CSFs
are manager specific
– This suggests that the information system should be in
constant flux with new reports being developed as needed
to accommodate changes in the organization’s strategy,
environment, or organization structure
Rockart, 1979
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
44
Hierarchical Nature of CSFs
Industry CSFs
Corporate CSFs
Sub-organization CSFs
Individual CSFs
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
45
Porter’s Five Forces Model
Forces that Shape Strategy

How will the business
Potential
react to threats (and
Entrants
opportunities)?
Threat of new entrants
Industry
Competitors
Bargaining power of
suppliers
Customers and
Buyers
Suppliers



Bargaining power of buyers
Rivalry among
existing firms
Substitutes
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento

Threat of substitute products or
services
46
Porter’s Five Forces Model

Potential
Entrants
Threat of new entrants
Industry
The
strategy
and
actions
an organization Bargaining
adopts depend
Bargaining power of
power of buyers
Competitors
upon
its
perceptions
of
itself
and
these
threats.
suppliers
Customers and
Buyers
Suppliers
Porter’s strategies:



• Product differentiationRivalry
(non-duplicable
among product or service)
• Low-cost producer
existing firms
• Market niche (market segment or geographical market)

Substitutes
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Threat of substitute products or
services
47
Value Chain Analysis
• Primary activities
– Inbound logistics
– Operations: converting inputs to outputs
– Outbound logistics
– Marketing and sales
– Service
• Supporting activities
– Organization infrastructure
– HR management
– Technology development
– Procurement
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Getting the
product or service
to the customer
Enabling the
value chain
48
Value Chain Analysis
Firm infrastructure
Support
Activities
Human resource management
Technology development
Procurement
Inbound
logistics
Operations
Outbound Marketing
logistics
and sales
Customers
Service
Primary Activities
How can value be added at every activity?
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
49
e-Business Value Matrix
• Project categories:
– New fundamentals
– Operational excellence
– Rational experimentation
– Breakthrough strategy
• Value of the project (low, high)
– Criticality to business
– Newness of idea
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
50
e-Business Value Matrix
Operational
excellence, high
criticality to business,
high newness of idea
New fundamentals
Operational
excellence
Rational
experimentation
High
Breakthrough
strategy
Low
High
Low
Criticality to business
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
51
Linkage Analysis Planning
• Steps
– Define power relationships among various players and
stakeholders
– Map out the extended enterprise to include suppliers,
buyers and strategic partners
– Plan electronic channels to deliver the information
component of products and services
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
52
Linkage Analysis Planning
Top management
Middle
management
Operations
management
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
Suppliers
New
competitors
Traditional
competitors
Stockholders
Government
Distributors
Retailers
Electronic Channels
53
Scenario Planning
• Steps:
– Define a decision problem and timeframe to bound the
analysis
– Identify the major known trends that will affect the
decision problem
– Identify just a few driving uncertainties
– Construct the scenarios
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
54
Scenario Planning
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
55
R. Ching, Ph.D. • MIS Dept. • California State University, Sacramento
56