InformationWeek Issue
Jan. 27, 2003
CEO Visions 2003: Looking Beyond the Storm
www.Informationweek.com
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?
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%
Chapter 5 Summary
Information Systems Can Redefine
Competitive Boundaries
Section 1 – The First Of Three
Perspectives: 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
Boundaries 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
Opportunities

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 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 Applications

Non-simultaneous communication.

Replaces traditional paperwork as forms are
filled out and submitted via electronic mail.
Possible 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?
Chapter 6 Introduction
Business Vision
What we’ve covered…
Course Overview
 Business Competitive Environment
 Porter Competitive Model
 Airline Industry Analysis
 Information Systems – redefining
competitive boundaries

What’s next . . .
A Systematic Approach
Vision
Strategy
Tactics
Business Plan
• Competitive Options
• Roles, Roles and Relationships
• Redefine and/or Define
• Telecommunications as the Delivery
Vehicle
• Success Factor Profile
Section II: Company
Perspective
Shown in the model are
the business and IS
factors that need to be
addressed to successfully
use information systems
to gain a competitive
advantage.
Primary 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 Process

To establish a clearly
vision of the future

To provide a basis for
sharing values and
views
Uncertainties 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.
USAA

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 Corporation

The World’s Largest Manufacturer and Marketer
of Major Home Appliances

David Whitwam, CEO in 1987. Initiated global
vision in 1988
Vision and Information Systems
Conclusions
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.
Chapter 6
Business Vision
CEO 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 is
vision, leadership and a hunger to
succeed.
P. R. Vagelos
Chairman and CEO
Merck
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 GE
His 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 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 Vision
Empower people through great
software, anyplace, any time and
on any device.
Values
Beliefs
Principles
Mission
Vision
Goals
Strategies
C
u
l
t
u
r
e
Tactics
Objectives
and
Measurements
Business
Plan
Authority
and
Responsibility
The 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 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 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.
Vision
•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 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
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 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 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 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 McGowan
Former CEO of MCI
A Systematic Approach
Vision
Strategy
Tactics
Business Plan
• Competitive Options
• Roles, Roles and Relationships
• Redefine and/or Define
• Telecommunications
as the Delivery Vehicle
• Success Factor Profile
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”1
Grand, abstract visions can be too
inspirational. The company may wind
up making more poetry than products.
Gerard H. Langeler
President, Mentor Graphics
The Vision to Action
Process
Implementation
(Action)
Agreement &
Commitment
Tactics and
Business Plan
Strategy
Feedback
Vision
Sensing
Opportunity
Figure 6-1
Vision Examples
• Robert McDermott at USAA
• David Whitwam at Whirlpool
• Peter Lewis at Progressive Corp.
• Gil Amelio at National Semiconductor
If 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.
USAA
• 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.
Information systems are strategic
weapons, not cost centers.
Robert F. McDermott,
Former USAA CEO
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 Videotape
USAA Vision 2000
An Events Oriented Organization
Needs
Member (Customer)
Key Points
Security
Quality
of Life
Supporting
Systems
Insurance
Products
Consumer
Services
Products
Wants
Asset
Management
Financial
Services
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 Services
So integrated that members lose
something if they go elsewhere.
USAA Business and IS Goals
1. Customer Convenient
2. Operator Efficient
3. Cost Effective
Information Systems Strategies
• Executive Partnership
• Strategic Architectures
• Technology Experimentation
• External Resource Leverage
• Technology Assimilation
• Horizontal Integration
IT 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
Mainframe Computer
A
Folder
Management
P
Application
Document Database
Direct Access
Storage Drive
Inner
Server
I
A
Storage
P Manager
Direct Access
Storage Drive
I
API
Token Ring
LAN
Application
Workstation
Application
Workstation
[
Image Workstation
]
Scanner
Image Workstation
On-line
Optical Disks
Service
Representatives
Optical Storage
Library
(Not On-line)
Figure 6-3
USAA Success Conclusions
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.
Whirlpool Corporation
• 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.
Financial 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%
2002 was a better year.
.078%
Whirlpool Corporation
Principal Products
Automatic Dryers
Automatic Washers
Dehumidifiers
Dishwashers
Freezers
Microwave Ovens
Ranges
Refrigerators
Trash Compactors
Room Air Conditioners
2001 Whirlpool Global Sales
Other
Cooking appliances
Laundry appliances
Refrigerators and freezers
0%
10%
20% 30%
40%
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 Brands
Whirlpool
Maytag
GE
Electrolux
Kitchen Aid
Roper
Whirlpool
Admiral
Hardwick
Hoover
Jenn-Air
Magic Chef
Maytag
Norge
GE
RCA
Hot Point
Frigidaire
Gibson
Elna
Eureka
Kelvinator
O’Keefe and
Merritt
Tappan
WhiteWestinghouse
Kenmore*
* Manufactured for Sears
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 Corporation
How 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
Four Whirlpool Options
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 worldwide large appliance industry.
Whirlpool 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.
Whirlpool 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 Excellence
Stakeholder Value
Where
Way
What
Value Creating
Objectives
How
Worldwide
Excellence
System
Whirlpool 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. Whitwam
Whirlpool CEO
Platform for Global Success
1. Product Technology.
2. Procurement.
3. Information Systems
GE 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
Japan
Matshushita Electric
Hitachi
Sweden
Electrolux
Korea
Samsung
Figure 6-5
Morita and Sony
Sony 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.
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.
Newspapers
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
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
Newspapers
1960
Internet
1970
Others
1980
Direct Mail
1990
Cable TV
2000
Broadcast TV
2001
Radio
0%
10%
20%
30%
40%
50%
US Advertising Expenditures
Billions of $
2001
2000
1990
1980
1970
1960
$0
$50
$100
$150
$200
$250
$300
A 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.
Business Vision
Increasingly, companies are using
vision statements to explain who they
are, where they are going and why
customers and employees should
follow them there.
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?
Absolutely, positively overnight!
Federal Express
Good Vision Statement?
To make the maximum computing power
available to a broad user audience through
open technologies.
Sun Microsystems
Sun 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?
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.
Good Vision Statement?
Do it, try it, fix it!
Wal-Mart Stores
Wal-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 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 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 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 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 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?
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 Process
• Define the Business Environment.
• Build a Company Vision.
• Turn the Vision into a Plan.
• Drive Action with the Plan.
Invest
Vision
Save
Money
Asset
Applications
Networks
Expense
Strategic
Tools
Tactical
By instilling:
You create:
Which results in:
Leadership
Improved
Performance
Vision
Market
Impact
Strategy
Tactical
Excellence
Innovation
A Great
Company
Excellent
Reputation
Sustained
Success
Leadership 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.
Successful Business Leader
Andris Istvan Grof
Andy Grove
Walked 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.
Earned a degree in Chemical Engineering from NYU and a
PhD from Cal, Berkeley in 1963.
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.
Worries about fighting complacency and emphasizes
measuring failure.
“As a manager, fear is your ally because it gets you out
of your comfort zone.”
Andy 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 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 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 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.
Vision
Which attitude would you support on this subject?
1. There is little hard evidence that companies
with vision statements perform better than
those without.
2. At the current rate of change in the business
environment, companies need a clear,
consistent sense of where they are going.