What’s Happening?!
AOL Time Warner reported the largest corporate loss for a
single year EVER!
Grey Davis is considering making Internet-based
businesses to pay sales taxes on all of their sales.
Midterm Exam
1. Must answer essay question
30 pts.
2. 1 of 2 essay questions
20 pts.
3. 5 of 6 single topic essay questions
50 pts
You will have the entire class for the exam.
I will provide paper—you provide answers.
Chapter 6 Summary
Business Vision
What is a Vision?
A Photograph of the Future
Why A Good Vision?
It Establishes a clear direction of the
company for the future.
 Provides a basis for sharing values and
views.
 It sells the company on itself.

How Important Is a Vision?

This is one of the reasons that companies
pay their CEOs so much money.

The right CEO with the right vision can
make a major difference.
Cases In Point
USAA
 Whirlpool

“The most important thing that I do is to make sure that people
within USAA know where we are going. They can then make
day-to-day decisions consistent with that direction.”
Bob McDermott, USAA
USAA: What happened?
General Robert F. McDermott took over
 Over the course of 24 years:

– Assets increased from 206 million to 31 billion
(150 times)
– Annual Revenue increased from 143 million to
5.3 billion (37 times)
– Customer Base increased from 653,000 to 2.4
million. (4 times)
How did it happen?
Improved member service by:
– Automating policy writing system
– Reducing the number of employees
– Upgraded employee quality via education and
training.
– Decentralized decision making and empowered
employees.
– Implementing a leading-edge image processing
system.
Expanded Services
New Major Business Opportunities:
– Insurance Products—added life insurance
– Consumer Services Products—plus travel
services
– Financial Services Products including a Savings
and Loan
Role of Information Systems
Information Systems are strategic weapons,
not cost centers.
Information Systems Evaluation Criteria:
1. Customer convenient
2. Operator efficient
3. Cost effective
Whirlpool’s Vision
To become the global leader in the large
appliance industry.
Translation
Doing what we do, we will improve and
expand by making customers happy.
We will follow the demands of the market,
and be efficient and profitable.
Why Global?

Less growth opportunity in North America.

Only real option to increase revenue.
Implementation of Vision
Purchased Phillips Electronics N.V., placing
Whirlpool in Europe
 Practice the strategy of ‘Think Global, Act
Local’
 Hired new executives with global
experience.
 Standardized products.
 Major new emphasis on the role of
information systems.

Why Have a Vision?
Provide Direction
The Vision Process
1: Define the Business Environment
2: Build Company Vision
3: Turn the Vision into a plan.
Possible Exam Questions
1. How would a company go about determining a
new vision?
2. What major challenges would a company
encounter to establish a new vision
successfully?
Chapter 7 Introduction
Implementing a Vision: Strategy,
Tactics and Business Plan
Chapter Objective
Provide an understanding of how a
company makes the transition from
vision to action.
A New Business Strategy
New business strategies are based on three
components:
1. Vision
2. External assessment
3. Internal assessment
Strategic Management Process
Strategic Management Process
Environmental Analysis
General Environment
Operating Environment
Competitive Positioning
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i
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rtu ats
o
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e
Op Thr
Directions for Development
Company
Vision
Company
Strategic
History
Current
Strategy
Stakeholder
Analysis
Vision &
Strategy
Chosen
Strategy
Realized
Strategy
Company Analysis
Structure
Values/Culture
Skills
Figure 7-2
Resources
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Reprinted with permission from
The Strategic Management Blueprint
Cambridge, Ma: Blackwell, 1993.
Strategy-to-tactics Implementation
Strategy Implementation
Senior Management
Vision
and Macro
Strategies
Business Uncertainties
Empowered Implementers
Company Culture
Risks to be Avoided
Critical Performance
Factors
Micro
Strategies
and
Tactics
Key Enterprise
Business Processes
Figure 7-3
The Business Plan
The part of the process that deals
with the allocation of resources –
money (capital and expense
funds) and head count (people).
An information-oriented infrastructure is
key to a responsive competitive strategy
Company Infrastructure
• Data Management
• User Applications
• Voice Management
• Network Management
• Planning Process
• Financial Strategy
• Organization
Conclusions
1. Business strategies do not compete with the use
of information systems. The goal is for them to
become successful with the support of
information systems.
2. Information systems can never be successful as a
competitive resource if they do not support the
right business strategies.
Chapter 7
Implementing a Vision:
Strategy, Tactics and
Business Plan
If we know where we are and something
about how we got there, we might see where
we are trending--and if the outcomes which
lie naturally in our course are unacceptable,
to make timely changes.
Abraham Lincoln
President of the United States
Primary Business Challenges
• Deciding what things are worth
doing.
• Getting things done!
If the strategy is a hammer, the tactic is
a nail. The actual end results are
accomplished by the nail. If the nail
isn't hammered correctly then the battle
is lost. Sometimes the hammer also
misses the nail.
When in Doubt
Whether dealing with vision, strategies or tactic
think customer!
Remember that a major difference between
companies is how they treat their customers.
Also the importance of doing its homework on
its competitors.
Defining the Three Key
Elements
Vision: Identifies what the organization
wants to look like at some logical point in
the future.
 Strategy: How a company will achieve the
long-term goal of the vision.
 Tactics: More specific time-oriented,
measurable ways to make a vision a reality.

Business Strategies!?
How important are they, really?
Do business strategies really make a difference
between success and failure of a company?
Read-Rite Corp.
1. Cash flow problems
2. Largest customer was getting out of disk drive
manufacturing.
3. Increasing threat of Japanese competition.
4. Limited customers dictates the need to exploit the
Japanese market.
Strategic Solutions
1. Formed a joint venture with Sumitomo Metal Industries and
received $30 million investment in Read-Rite as part of the
agreement.
2. Used the credibility of the joint venture to purchase the
manufacturing facility of its largest customer through a
transfer of equity in Read-Rite and signed a long-term
agreement to supply disk heads to the customer.
3. Went public (sold stock) and raised a significant amount of
capital.
4. Invested in a manufacturing facility in the joint venture
company in Japan and initiated a marketing effort in Japan.
Operating Goals
1. Attain highest customer satisfaction in the industry.
2. Provide just-in-time technology.
3. Achieve lowest possible cost.
4. Attract, attain and develop the best team in the
industry.
5. Enhance shareholder value.
Progressive Corporation
1988 Performance
•
•
•
•
•
•
Record Revenue
Record Earnings
Outstanding Company Culture
Highly Respected Business Leader
Well Regarded Company
Could Things Possibly Be Better?
Progressive Corporation
1989 Impact
• Voters Passed Proposition 103 in
California Resulting in $52 Million
Being Put into an Escrow Account.
• Allstate Gained a Larger Market
Share in Progressive’s Niche
Market for the First Time.
Progressive Corp. Business
Progressive decided that it was really
in the business of reducing human
trauma and economic costs of auto
accidents.
Progressive Corp. Vision
We seek to be an excellent, innovative,
growing and enduring business by reducing
the human trauma and economic costs of
auto accidents in cost-effective and profitable
ways that delight customers.
Progressive’s New Business Strategies
•
•
•
•
•
•
•
•
A New Definition of the Business.
Establish Lower Profit Margin Objectives.
Pursue a Broader Auto Insurance Market.
Provide Consumer Access to Policy Rates.
Provide Policy Information to Customers.
Guarantee Policy Renewal.
Utilize Multiple Distribution Channels.
Promote Company Identity.
Progressive’s New Business Strategies
• Curtail Diversification.
• Reduce Operating Expenses.
• Assign Business Process Ownership.
• Establish a New Employee Compensation
System.
IS Support of New Strategies
• Express Quote Service.
• Immediate Response System.
Vision, Customer Value
Proposition, Core Values and
Objecitves
Progressive Vision:
We seek to be an excellent, innovative, growing and enduring
business by cost effectively and profitably reducing the human
trauma and economic costs of auto accidents and other
mishaps, and by building a recognized, trusted, admired,
business generating brand.
We seek to earn a superior return on equity and to provide a
positive environment which attracts quality people who
develop and achieve growth plans.
Progressive
Customer Value Proposition:
Our customer value proposition provides a litmus test for
customer interaction, relationships and innovation.
Fast, Fair, Better
That’s what you can expect from Progressive. Everything we
do recognizes the needs of busy customers who are costconscious, increasingly savvy about insurance and ready for
easy, new ways to quote, buy and manage their policies,
including claims service that respects their time and reduces
the trauma and inconvenience of loss.
Progressive
Core Values:
Progressive’s core values are pragmatic
statements of what works best for us in the real
world. They govern our decisions and behavior.
We want them to be understood and embraced by
all Progressive people. Growth and change
provide a new perspective, requiring regular
refinement of core values.
Progressive Core Values
Integrity We revere honesty. We adhere to high ethical
standards, report precisely and completely, encourage
disclosing bad news and welcome disagreement.
Golden Rule We respect all people, value the differences
among them and cope with them in the way we want to be
dealt with. This requires us to know ourselves and to try to
understand others.
Objectives We strive to communicate clearly Progressive’s
ambitious objectives and our people’s personal and team
objectives. We evaluate performance against all these
objectives.
Progressive Core Values
Excellence We strive constantly to improve in order to meet
and exceed the highest expectations of our customers,
shareholders and people. We teach and encourage our
people to improve performance and to reduce the costs of
what we do for customers. We base our rewards on results
and promote on ability.
Profit The opportunity to earn a profit is how the competitive
free-enterprise system motivates investment to enhance human
health and happiness. Expanded profits reflects our
customers’ and claimants’ increasingly positive view of
Progressive.
Peter Lewis
Currently Chairman of the Board
“We sell speed, not insurance.”
Glenn Renwick, President and Chief Executive
Officer
Raymond Voelker, Chief Information Officer
IS Exec Identity Crisis
“My world collapsed recently during a strategic planning
meeting between the information systems organization and
our marketing department.”
“How can we in IS help you to realize your goals?” asked the
IS Director. This seemed like a good open-ended question,
and I was waiting for the vice-president of marketing to
embrace IS in his confidence. We were prepared to act as a
full business partner with the marketing department.
“Beyond capacity planning for your computers, I don’t know
how you can help. I’m not even sure what your role is in all of
this” replied the VP of Marketing.
Information Technology Impact
Information
Technology
Information
People
Work
Organization
Information Technology Impact
Semi-automated batch
system (out-dated)
Information
Technology
Information
10 day
information
float
People
Route Salesman
Increased
complexity for
route
salesman and
plants
Work
Organization
Regional
Competitors
Information Technology Impact
Communications Network
and Hand-held Computer
Information
Technology
Information
Reduced
information
float to 24
hours
People
Route Salesman
Account Specialist
Merchandiser
Increased
complexity for
route
salesman and
plants
Work
Organization
Decentralized Marketing
Organization
Diversification Logic?
• ITT into Continental Baking.
• Sony into Hollywood (Tristar)
• PepsiCo into restaurants (Taco Bell, KRC and
Pizza Hut)
• PepsiCo into Wilson sporting goods and two
freight companies
• Viacom into retailing (Blockbuster)
• Xerox into insurance (Chubb and Forrester)
• Southern California Edison into sporting goods
A Valid Theory of Business
• Some theories of business last a long time, but
they do not last forever.
• A theory of business becomes obsolete when the
company achieves its original objectives.
• Any company that doubles or triples in size in a
short period of time has outgrown its original
theory.
A Valid Theory of Business
• The first signs of fundamental change rarely
appear among customers. They show up
among non-customers.
• Unexpected failure is as much a warning sign
as unexpected success and must be taken
seriously.
Toyota Diversification
At a time when diversification is often
suspect, Toyota, guided by a historical
perspective, is moving into other areas
such as prefab housing and especially
telecommunications.
Toyota Perspective
The company’s plan is driven by historical cycles dating to
the 1700s that suggest that a single line of business rarely
prospers for more than sixty years.
“We are not arrogant enough to believe that the automobile
business can be profitable perpetually.”
In 2000 they achieved 10% of sales ($10 billion) to come from
outside the auto and truck business.
The waves of change are reflected in the dominant
infrastructure of the time.
Prevailing Infrastructure
1800 Canals
1850 Railroads
1900 Highways
1950 Telecommunications
The Three Components of a New Strategy
Vision
Internal
Assessment
External
Assessment
A New Strategy
Figure 7-1
Strategy Considerations
• Competitive Environment
• Market Target
• Basis for Perceived Competitive Advantage
• Key Profit Drivers
• Product and/or Service Portfolio
Hello, Porter Competitive Model!
Additional Considerations
• Whether to be an industry leader or follower.
• How aggressively to implement a new strategy.
• Determining people skills and availability.
• Determining that funding is available.
• Not violating factors ranging from laws to company values.
• Balancing short and long term objectives.
• Producing positive results within the scope of the mission and
vision of the business.
Strategic Management Process
Environmental Analysis
General Environment
Operating Environment
Competitive Positioning
s
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t u ts
r
po rea
p
O Th
Directions for Development
Company
Vision
Company
Strategic
History
Current
Strategy
Stakeholder
Analysis
Vision &
Strategy
Chosen
Strategy
Realized
Strategy
Company Analysis
Structure
Values/Culture
Skills
Figure 7-2
Resources
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Reprinted with permission from
The Strategic Management Blueprint
Cambridge, Ma: Blackwell, 1993.
Competitive Analysis
What drives the competitor?
Future Goals
At all levels of management
and in multiple dimensions
What the competitor is doing
and can do
Current Strategy
How the business is currently
competing
Competitors Response Profile
Is the competitor satisfied with its current position?
What likely moves or strategy shifts will the competitor
make?
Where is the competitor vulnerable?
What will provoke the greatest and most effective
retaliation by the competitor?
Assumptions
Capabilities
Held about itself and the
industry
Both strengths and
weaknesses
SWOT Analysis
• Strength: A collective organizational competency, asset
or capability that enables it to achieve a high level of
success.
• Weakness: A collective organizational competence,
asset or capability that is competitively inferior and
provides a vulnerability that can be exploited.
• Opportunity: A trend or event that could lead to a
positive change in position if addressed by a strategic
response.
• Threat: A trend or event that could lead to a negative
change in position if not addressed by a strategic
response.
Source: The Art of Strategic Planning
for Information Technologies
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Suggest
strategies that
should be
tested against
Vision
Goals
Company Values
Financial Status
Cash Position
ROI Position
Societal Demands
Competition
Core Competencies
People Skills
Overall Resources
Six Strategy Responses
1. Retreat to core businesses and outsourcing
non-core services.
2. Redefining the entire nature of the business.
3. New forms of association or alliances.
4. Changing products and/or services.
5. Reengineering business processes.
6. Recognizing the need for information.
Strategies can be relatively
simple. Implementation is
often the major challenge.
A Logical Approach
• Find a tactic that will work.
• Build it into a strategy.
Employee downsizing, right-sizing or
dumb-sizing (take your choice)
should not be based solely on cost
cutting.
Smart Sizing
• Consistent with the vision and strategies of
the organization.
• Help build future strengths of the company
while streamlining or eliminating
unnecessary processes and functions.
• A big of a price to pay for anything less
than this.
Essential to Run a Business
• Vision
• Strategy
• Tactics
The Importance of these
Factors as Key Priorities
Continues When People
Are Empowered with
More Authority
and Responsibility
Strategy Implementation
Senior Management
Vision
and Macro
Strategies
Business Uncertainties
Empowered Implementers
Company Culture
Risks to be Avoided
Critical Performance
Factors
Micro
Strategies
and
Tactics
Key Enterprise
Business Processes
Figure 7-3
Managing for Results
•
•
•
•
•
•
•
•
Objectives
Authority
Responsibility
Training
Motivation
Performance
Results
Reward
Control
Figure 7-4
Information Needs
Senior Management
Emerging Opportunities and Threats
External Impact of Strategies and Tactics
Internal Impact of Strategies and Tactics
Performance Measurements
Empowered
Implementers
Figure 7-5
Strategy-to-Tactics
Implementation

Defining the range of business that the company
will pursue.

Responding in an appropriate and timely manner.

Delegating of responsibilities for formulating
specific strategies to people who are closer to the
demands of the customer and market.
Company Infrastructure
•
•
•
•
•
•
•
Data Management
User Applications
Voice Management
Network Management
Plan Process
Financial Strategy
Organization
Figure 7-7
IT Based Strategies
MARKET PLACE
OPERATIONS
SIGNIFICANT
STRUCTURAL
CHANGE
Federal Express
USA Today
Charles Schwab
Whirlpool
Xerox
TRADITIONAL
PRODUCTS
AND PROCESSES
USAA
L.L. Bean
McKesson
BancOne
Boeing
Frito-Lay
Wal-Mart
Figure 7-6
Which Way Should the Arrows Go?
Business Vision
and Strategies
Right Sizing
Re-engineering
Total Quality
Management
Conclusions




A strategy should often be kept relatively simple.
Success relies on gaining understanding,
acceptance, and support by people within the
company.
The strategy must accomplish its objectives by
providing direct or indirect value to customers.
Information Systems can only be successful if it
supports the right business strategies.