McGraw-Hill/Irwin
©2005 The McGraw-Hill
Companies,
All rights reserved
Chapter 2
MAJOR BUSINESS
INITIATIVES
Gaining Competitive
Advantage with IT
McGraw-Hill/Irwin
©2005 The McGraw-Hill Companies, All rights reserved
OPENING CASE STUDY
• GM’s Digital Loyalty Network (DLN) Makes it
More Competitive
• One of DLN’s principal innovations is order to
deliver (OTD)
• OTD reduced delivery time of ordered
vehicles by 50 percent
• GM’s many customer “touch points” were not
being used effectively
2-3
OPENING CASE STUDY
• GM’s BuyPower Web site gave it a better
understanding of its customers
• U.S. call centers went from 40 to 3
• 19 global customer databases were reduced
to 3 data warehouses
• GM won the Polk Automotive Loyalty Award
for the fourth consecutive year
2-4
STUDENT LEARNING OUTCOMES
1. Describe SCM systems, their competitive
advantages, challenges to their use, and IT
support
2. Describe CRM systems, their competitive
advantages, challenges to their use, and IT
support
3. Describe BI systems, their competitive
advantages, challenges to their use, and IT
support
2-5
STUDENT LEARNING OUTCOMES
4. Describe ICE systems, their competitive
advantages, challenges to their use, and IT
support
5. Describe how individual systems work
together to give airline companies a
competitive advantage
2-6
INTRODUCTION
• Important IT applications businesses are
using today
–
–
–
–
Supply chain management (SCM)
Customer relationship management (CRM)
Business intelligence (BI)
Integrated collaboration environments (ICE)
2-7
SUPPLY CHAIN MANAGEMENT
• Distribution
chain – the
path followed
from the
originator of a
product/servic
e to the end
consumer
2-8
What are Supply Chain Management
Systems?
• Supply chain management (SCM) - tracks
inventory and information among business
processes and across companies
• Supply chain management (SCM) system an IT system that supports supply chain
management activities by automating the
tracking of inventory and information among
business processes and across companies
2-9
What are Supply Chain Management
Systems?
2-10
What are Supply Chain Management
Systems?
• Just-in-time - an approach that produces or
delivers a product or service just at the time
the customer wants it
• Logistics - the set of processes that plans
for and controls the efficient and effective
transportation and storage of supplies from
suppliers to customers
2-11
Strategic and Competitive
Opportunities with SCM
• A well-designed supply chain management
system helps by optimizing:
–
–
–
–
–
Fulfillment
Logistics
Production
Revenue and profit
Spend
2-12
Strategic and Competitive
Opportunities with SCM
• Collaborative planning, forecasting, and
replenishment (CPFR) - a concept that
encourages and facilitates collaborative
processes between supply chain partners
2-13
Challenges to Success with Supply
Chain Management
• Executives must recognize its importance
• Work closely with customers and suppliers
• Your IT systems and the IT systems of your
customers and suppliers must be integrated
• Your SCM systems must continuously adapt
to changing conditions
2-14
IT Support for Supply Chain
Management
• Specialized SCM software and ERP software
suites
• Application service provider (ASP) supplies software applications (and often
related services) over the Internet that would
otherwise reside on its customers’ in-house
computers.
2-15
IT Support for Supply Chain
Management
2-16
CUSTOMER RELATIONSHIP
MANAGEMENT
• Two success stories with customer
relationship management
– Wells Fargo Bank sells four additional banking
products to customers compared with an industry
average of 2.2
– The American Cancer Society is better able to
target large donors
2-17
What are Customer Relationship
Management Systems?
• Customer relationship management
(CRM) system - uses information about
customers to gain insights into needs, wants,
and behaviors in order to serve them better
• Sales force automation (SFA) system automatically tracks all the steps in the sales
process
2-18
What are Customer Relationship
Management Systems?
2-19
Strategic and Competitive
Opportunities with CRM
• More effective marketing campaigns based
on customer needs and wants
• Assuring the sales force is efficiently
managed
• Providing superior after-sale service and
support
2-20
Strategic and Competitive
Opportunities with CRM
•
•
•
•
Revenue Enhancers
Increase sales
effectiveness
Improve customer
retention
Increase revenue per
customer
Offer new
products/services
•
•
•
•
Cost Cutters
Decrease cost of sales
Decrease cost of
service
Cost per service
interaction
Transition to more selfservice
2-21
Challenges to Success with Customer
Relationship Management
• More than 50 percent of CRM installations
are seen as failures
• Why many CRM installations are less than
successful
– The company’s goals are too broad
– The company’s strategies are too generic
– Implementations are often too software-centric
2-22
IT Support for Customer Relationship
Management
2-23
IT Support for Customer Relationship
Management
• Front office systems – the primary interface
to customers and sales channels
• Back office systems - used to fulfill and
support customer orders
2-24
IT Support for Customer Relationship
Management
• CRM software providers (e.g. Clarify, Oracle,
SAP, Siebel Systems)
• SFA software providers (e.g. Clarify, Siebel,
Salesforce.com, Vantive)
• Salesforce.com was the first to use an ASP
model and others have followed
2-25
BUSINESS INTELLIGENCE
• How FiberMark benefits from business
intelligence (BI)
– They used to print 1,000 page reports for each
salesperson
– Now salespeople get the information they want
from FiberMark’s intranet
– FiberMark’s BI system paid for itself in 9 months
2-26
What are Business Intelligence
Systems?
• Business intelligence (BI) – knowledge
about your customers, your competitors, your
business partners, your competitive
environment, and your own internal
operations – that gives you the ability to
make effective, important, and often strategic
business decisions.
2-27
What are Business Intelligence
Systems?
• Business intelligence (BI) systems – the IT
applications and tools that support the
business intelligence function within an
organization
• Competitive intelligence - business
intelligence focused on the external
competitive environment
2-28
What are Business Intelligence
Systems?
2-29
What are Business Intelligence
Systems?
• The objective of BI is to help knowledge
workers understand
– Capabilities available in the firm
– State of the art, trends, and future directions in
the market
– Technological, demographic, economic, political,
social, and regulatory trends
– Actions of competitors
2-30
What are Business Intelligence
Systems?
• Data warehouse– a logical collection of
information - gathered from many different
operational databases – used to create
business intelligence that supports business
analysis activities and decision-making tasks
• Data mart - a subset of the data warehouse
in which only a focused portion of the data
warehouse information is kept
2-31
What are Business Intelligence
Systems?
• Other technical components of business
intelligence include such tools as
– Data mining
– Automatic exception detection with proactive
alerting and automatic recipient determination
– Automatic learning
• Data-mining tool - a software tool you use to
query information in a data warehouse
2-32
Strategic and Competitive
Opportunities with BI
• Strategic uses of business intelligence
ranked in order of importance
– Corporate performance management
– Optimizing customer relations, monitoring
business activity, and traditional decision support
– Packaged stand-alone BI applications for specific
operations or strategies
– Management reporting of business intelligence
2-33
Strategic and Competitive
Opportunities with BI
• BI systems provide managers with
–
–
–
–
Actionable information and knowledge
At the right time
At the right location
In the right form
2-34
Strategic and Competitive
Opportunities with BI
2-35
Challenges to Success with Business
Intelligence
•
•
•
•
Deal with an important business issue
Provide customized BI information
Build discipline and precision in processes
Knowledge workers must understand how to
use BI tools effectively
• Understand that BI systems are complex and
continually change
2-36
IT Support for Business Intelligence
• There are many software companies in the BI
field
• Digital dashboard - displays key information
gathered from several sources on a computer
screen in a format tailored to the needs and
wants of an individual knowledge worker
2-37
IT Support for Business Intelligence
2-38
INTEGRATED COLLABORATION
ENVIRONMENTS
• How Siemens benefits from an integrated
collaboration environment
– Much of its work is done by virtual teams
– SiteScape’s Forum software lets teams share
documents and ideas
– Each team member can contribute freely from
anywhere and at any time
2-39
What are Integrated Collaboration
Environments?
• Integrated collaboration environment
(ICE) - the environment in which virtual teams
do their work
• Virtual team - a team whose members are
located in varied geographic locations and
whose work is supported by specialized ICE
software or by more basic collaboration
systems
2-40
What are Integrated Collaboration
Environments?
• Collaboration system - software that is
designed specifically to improve the
performance of teams by supporting the
sharing and flow of information
• Alliance partner – a company your company
does business with on a regular basis in a
collaborative fashion, usually facilitated by IT
systems
2-41
What are Integrated Collaboration
Environments?
• Workflow - defines all of the steps or
business rules, from beginning to end,
required for a business process
• Workflow system - facilitates the automation
and management of business processes
2-42
What are Integrated Collaboration
Environments?
• Document management system - manages
a document through all the stages of its
processing
• Knowledge management (KM) system – an
IT system that supports the capturing,
organization, and dissemination of knowledge
(i.e., know-how) throughout an organization
2-43
What are Integrated Collaboration
Environments?
2-44
What are Integrated Collaboration
Environments?
• Social network system - an IT system that
links you to people you know and, from there,
to people your contacts know
– Build your network
– Find the people you need
– Make a trusted contact
2-45
Strategic and Competitive
Opportunities with ICEs
• The payoffs can be huge
• The oil and gas exploration industry could
save an estimated $7 billion
• “If only HP knew what HP knows”
2-46
Challenges to Success with Integrated
Collaboration Environments
• Acceptance of knowledge management
systems has been particularly difficult
– People don’t submit their knowledge to the
knowledge repository
– People are reluctant to share what they know with
others
– People say they don’t have the time to submit
information. IT can help with techniques to
capture knowledge automatically
2-47
IT Support for Integrated Collaboration
Environments
•
•
•
•
•
•
Collaboration software
Workflow systems
Document management systems
Peer-to-peer collaboration software
Knowledge management (KM) systems
Social network systems
2-48
IT Support for Integrated Collaboration
Environments
• Presence awareness - a software function
which determines whether a user is
immediately reachable or is in a lessavailable status
• Peer-to-peer collaboration software permits users to communicate in real time
and share files without going through a
central server
2-49
A VIEW OF THE INTEGRATED
ENTERPRISE
2-50
Airline Reservation Systems
• SABRE and APOLLO were very profitable for
American and United
• American and United had access to BI on
their own as well as on their competitors’
flights
• Competitors had to wait to get BI and also
had to pay for it
2-51
Frequent Flyer Programs
• Frequent flyer programs are a great example
of CRM
• Air travelers concentrate their travel with a
single airline to get “perks”
• Finnair is using BI to increase loyalty
• Most information needed for frequent flyer
programs is obtained from reservation
systems
2-52
Airline Maintenance Systems
• Airlines use SCM systems to be sure
maintenance parts are available when
needed
• Integrating SCM and BI helps airlines predict
where and when spare parts will be needed
2-53
Yield Management Systems
• Yield management system - specialized
kind of decision support system designed to
maximize the amount of revenue an airline
generates on each flight
• Fares change over time for a specific flight
based on number of seats sold
• Objective: highest average cost per seat
2-54
Yield Management Systems
2-55
Integrated Collaboration Environments
• Many airlines are global businesses with
employees located all over the world
• Airline employees often work in virtual teams
• ICEs let them avoid travel even though it’s
free
• ICEs are an interesting competitive threat to
airlines
2-56
CAN YOU…
1. Describe SCM systems, their competitive
advantages, challenges to their use, and IT
support
2. Describe CRM systems, their competitive
advantages, challenges to their use, and IT
support
3. Describe BI systems, their competitive
advantages, challenges to their use, and IT
support
2-57
CAN YOU…
4. Describe ICE systems, their competitive
advantages, challenges to their use, and IT
support
5. Describe how individual systems work
together to give airline companies a
competitive advantage
2-58
CHAPTER 2
End of Chapter 2
McGraw-Hill/Irwin
©2005 The McGraw-Hill Companies, All rights reserved