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Managing Information, People and IT to Drive Business PerformancePresented by Dr. Donald A. MarchandProfessor, Strategy & Information Management, IMD,and,Chairman & President, enterpriseIQLausanne, Switzerland
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2.32.5
2.72.9
3.2
2000 2001 2002 2003 2004
“The Information Technology (IT) Paradox”
Source: IDC - *Tech’s Soft Landing in a Rough Economy
Worldwide IT Spending(In Trillions of Dollars)
The Elusive Value of IT
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The Link of IT Spending to Company Performance
CustomerBenefit
The ITIndustry
Capital Flows
IT Innovation
Information Technology Investments
CompetitiveNecessity{
IncreasedCompanyOutput
Falling MarketPrices (Competition)
√
√
BusinessPerformance(Profitability)X
CompetitiveAdvantage{
Source: Hitt and Brynjolfsson, 1996
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To Impact Business Performance, Business Managers Typically Look at IT as a Visible (Hard) Factor That They Can Invest in and Influence
IT Practices
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Soft Factors are not Captured and Factored into these Measurement Approaches
Information Technology Practices
InformationManagementPractices
InformationBehaviorsand Values
Information Orientation (IO)
{• Difficult to MeasureEmployees’ Behaviorsand Values
• Difficult to SeeInformation’s Value
• Difficult to ManageBetter KnowledgeManagement and Use
The Cemex Way: The IT Legend
In our fifth e-strategy brief, we look at a
rarity: a company in the industrializing
world that has used e-business to steal
a march on its rich-world rivals (Wired)
CEO Zambrano can check sales figures or kiln temperatures in any plant in the world from a communications center in Monterrey that looks like a set from a science fiction movie (Forbes) or NASA’s control room in Houston (The Economist).
“Cemex in a league with Dell and Cisco as one of the world's leading digital re-inventors.” (Business Week)
“Cemex's ready-mix delivery trucksare equipped with dashboard computers that allow tracking by global positioningsatellite (GPS) technology.”
“In Latin America,Cemex uses time
division multiplexer satellite
networks.” (ComputerWorld)
In each case, "post-merger integration teams" ie, executives armed with laptops, were dispatched to analyse the new acquisition, to cut
costs, and to harmonise its technical systems and management methods with CEMEX's.
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Cemex – Global Growth Through Superior Information Capabilities
2Refocus in the CoreBusiness-Cement:Becoming a DomesticLeader
Building IT Infrastructure- built satellite
telecommunications system & other IT infrastructure
- trained people how to use it
x1984
Started selling
non-corebusinesses
x1985
L. Zambranobecame
CEO
x1987IniguezjoinedCemex
3Globalization:Latin Emerging Markets
Focusing on People & Processes- developed post acquisition expertise- hired "people oriented" IT managers- conducted training
on human philosophy by Fernando Flores- implemented business process
re-engineering program- built an entrepreneurial mood
x1992
AcquiredSpanish
operations
x1993Cemtec
was formed
x1995
LaunchedDSO
x1997
Entered Asia -acquired a company
in Philippines
GlobalGrowth
DomesticConglomerate
Building InformationCapabilities
x1906
Companywas formed
1
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Cemex – Global Growth Through Superior Information Capabilities
E-Business:1. Intranet
InternetExtranet
Expansion intoNon-Latin EmergingMarkets
4GlobalGrowth
Building InformationCapabilities
x1997
Entered Asia -acquired a company
in Philippines
x1999Listed
inNYSE
5
x2000
AcquiredSouthdown;CxNetworks
formed
x2001
Growth in Developed Markets& Embarking on E-Ventures
The Cemex Way: Information, IT & People- standardizing information system & process- e-enabling work force & supply/demand chain- creating information-culture among & providing training to employees, customers, suppliers & alliance partners, e.g. e-selling, e-procurement & e-workforce initiatives
E-Business:3. distribution logistics (CoSite)
& expansion in the construction industry (Arkio)
Time& Milestones
E-Business:2. CxNetworksa. dot.com- Construmix- Latinexus- Construplaza
b.e-business consulting- Neoris
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The Cemex Way: The Facts
“Contrary to what you read in the popular press, our success was not based on developing a good IT system. The press likes to focus on IT and our outcomes, but not about what we have been able to accomplish with our people. What we did was
create a new culture at Cemex, one that was based on commitments, and action.”
Gelacio Iniguez, former CIO, Cemex, current CTO of CxNetworks
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Breakthrough: Scientific measure of the interaction of people, information and technology and its proven link to business performance
Information Technology Practices
InformationManagementPractices
InformationBehaviorsand Values
Information Orientation
Business Performance
• Market Share Growth
• Financial Performance
• Level of Innovation
• Superior Company Reputation
{
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•Conducted at Europe’s leading Business School -- IMD in Lausanne, Switzerland
– Over 100 global companies including:
– More than 1200 senior managers– Across 26 industries – Nearly 40 countries
• Leading international business publications
Oxford M.I.T. Wiley
Four Years of Leading EdgeInnovative Research
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Information, people and
IT
Information, people and
IT
Statistical validation processes identify common thinking
Statistical validation processes identify common thinking
Managers can now speak the same language about
these ideas
Managers can now speak the same language about
these ideas
The Research Focuses on Managers' Shared Ideas
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Validation of Shared Ideas Allows Measurement and Comparison of Managers and Management Teams
…we can compare and benchmark
managerial thinking about enterprises
…we can compare and benchmark
managerial thinking about enterprises
As management thinking becomes
measurable…
As management thinking becomes
measurable…
Enterprises can now be cross-compared using
validated metrics!
Enterprises can now be cross-compared using
validated metrics!
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SEMSEM
Our Analysis Confirms or Disconfirms Shared Ideas of Managers and Management Teams
CFACFA
IT PracticesIT Practices
OperationalSupport
OperationalSupport
InnovationSupport
InnovationSupport
ManagementSupport
ManagementSupport
ProcessSupportProcessSupport
Example: Confirmatory Factor Analysis (CFA) Structural Equation Modeling (SEM)
CFACFA
Financial performanceFinancial performance
Market share growthMarket share growth
Ability to achieve a superior company reputation
Ability to achieve a superior company reputation
Level of product and service innovations
Level of product and service innovations
BusinessPerformance
BusinessPerformanceX
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New Performance Metric
Information Orientationis the first,validated Measure of Information Effectiveness
to Business PerformancePeopleInformation Behaviorsand Values (IBV)
InformationInformation ManagementPractices (IMP)
TechnologyInformation TechnologyPractices (IMP)
IT for Management Support
IT for Innovation Support
IT for Business Process Support
IT for Operational Support
Proactiveness
Sharing
Transparency
Control
Formality
Integrity
Sensing
Processing
Maintaining
Organizing
Collecting
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Higher IO Maturity
Lower IO Maturity
Information Management Practices
Information Behaviors And Values
Information Technology Practices
Proactiveness
Sharing
Transparency
Control
Formality
Integrity
The Maturity Framework: Management Prescriptions for Information and Knowledge Use
Sensing
Processing
Maintaining
Organizing
Collecting
IT for Management Support
IT for Innovation Support
IT for Business Process Support
IT for Operational Support
IO M
atu
rity
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Differences Between High and Low Companies
European BankEuropean Bank
SkandiaBankenSkandiaBanken
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• The majority of IT resources and personnel were committed to converting the IT operational and transaction systems of the bank with that of a merged bank. After five years, only 80% of the two systems had been merged.
• Two additional restructuring programs, the transition to the Euro, and Y2K during the late 1990s continued to focus the IT department’s attention almost exclusively on infrastructure and operational issues.
A Large European Retail Bank: Low , Low Business Performance
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• Customer channels fragmented
• Cross-selling in the branches failed
• Relationship managers relied on personal systems
• Product managers had inadequate decision-making tools and complained of overload
• Senior managers blamed "IT problems" for under performance
Low , Low Business Performance
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• First successful branchless bank in Scandinavia, profitable since opening, 1996.
• Value Proposition to Customers: truthfulness, simplicity, high interest rates
• In 2000, awarded Best Bank of the Year in Sweden for the third year in a row. Privata Affärer (2000)
• By 2001, Sweden’s fifth largest retail bank with 400,000 customers, growing at an annual rate of 25%
SkandiaBanken’s Senior Managers Focused on Both Hard and Soft Factors
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Information Behaviors and
Values
Proactiveness
Sharing
Transparency
Control
Formality
IntegrityTruthfulness: practiced top-down (e.g. transparent service fee schedule, account interest capitalized every month, CEO’s controversial letter asking customers to increase average withdrawal amounts)
No paper on desks; removal of bookshelves to encourage people to put information into the system; “all the information I need to run my business I can find easily in the system”
Few formal management meetings – people obligated to share problems with managers in real time
CEO “expects us to act”. Dynamic working plans: teams established; self regulated; peer education; one of highest customer service levels in banking industry
Everyone knows what everyone else is doing. Performance information is transparent at all levels; “people know their targets for revenues and costs;” incentives tied to transparent reporting
“Goran (CEO) trusts us and lets us make mistakes.” Open discussions of mistakes and solutions codified
SkandiaBanken: Developing IBV MaturityM
aturity
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Information Management
Practices
Sensing
Processing
Maintaining
Organizing
Collecting
Keep it simple: call center reps use same user interface as that used by customers.
Ear to customer: customer suggestions rigorously recorded and acted on; targeted customer surveys
Customer Request Rule: No new product or service introduced to the customer unless requested (even IT projects under development)
Automated cross selling (internet pop ups) based on customer segmentation
Replacement rule: Nothing added to the web site unless something is removed -- cut information overload
Mat
urity
SkandiaBanken: Developing IMP Maturity
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Information Technology Practices
IT for Operational Support
IT for Innovation Support
IT for Business ProcessSupport
IT for Management Support
One face to the customer (internet, phone, WAP, digital TV channels); lowest cost services and highest interest rates
Direct link to institutional and national banking infrastructure; Merged 4 product call centers into 1 – cross trained
Auto-dealer portal providing personalized dealer sales & customer information strengthening partnerships
On-line credit approval within 15 seconds for home mortgages and auto loans
Maintains profitability by managing lending and deposit levels across different business units; Deep knowledge of customer and cross selling key
Mat
urity
SkandiaBanken: Developing ITP Maturity
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Global Financial Services (GFS) Group –Case Study
GFS• In 60+ countries• 30 million customers• 60,000 employees• Annual revenues of $40 billion• Manages $300 billion of assets
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Non-lifeinsurance
(individual and commercial customers)
Life insurance (individuals and
businesses)
Asset Management(private and institutional investors)
Reinsurance(finite risk and
traditional reinsurance)Core BusinessesCore Businesses
The Importance of Asking the “Right” Questions
How can IT be used as a strategic tool for competitive advantage?
How can IT be used as a strategic tool for competitive advantage?
Change projects initiated by the CEO
Change projects initiated by the CEO
Asset Management
Key Corporate Customers
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• Competitive analysis: IT focus
• Current and new technology: business impacts– mobile computing, – call centers, – E-commerce
• IT capabilities: money, people, organization
• Past and current IT projects: evaluation
FocusFocus
• Organization, culture, and skills
• Measurement systems
• Accessibility of data
• Uniformity of worldwide service standards
• Regulatoryrequirements
• Funding mechanisms for IT
Key Weaknesses/Opportunities
Key Weaknesses/Opportunities
GFS’ SWOT Analysis of the IT Area:Focus and Key Weaknesses/ Opportunities
BU Comparison: Information Orientation vs Business Performance
Median
Information Orientation
Busi
nes
s Pe
rform
ance
0.00
10.00
20.00
30.00
40.00
50.00
70.00
80.00
90.00
100.00
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00
1
3
5
6
7
8
9
10
11
12
13
14 15
16
18
19
20
22
25 26
27
29
30
31
33
35
37
38
39
4041
4243
4445
46
47
4860.00
32
3436
28
23
172421
42
Winner at RiskWinner at Risk
Info OrientedLaggard
Info OrientedLaggardBlind and ConfusedBlind and Confused
Self-Aware Winner
Self-Aware Winner
Self-Aware WinnerPractices Information Orientation to drive high performance
Winner at RiskDelivers good performance now, but lower IO may prevent continued success
Info Oriented LaggardUnderstands Information Orientation, but suffers fundamental weaknesses
Blind and ConfusedMajor business change required/needed
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The Management Challenge: Optimize the Portfolio Strategy Across the Group
IO Diagnostic™ Conclusion:Managers have to build on their strengths and minimize their
weaknesses across all BU’s to improve the overall Information Capabilities of the Group.
Winner at Risk
Blind and Confused
Self-Aware Winner
Info Oriented Laggard
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Finally, the Group Must Improve to enable its future business vision
Today’sCapabilities
Time
Tomorrow’sCapabilities
Strategic Transformation in GroupCapabilities today
IOIOInsurance
IntegratedFinancial Services
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Banco Bilbao Vizcaya Argentaria (BBVA): Executing Growth Strategies with Dynamic Information Capabilities
•Develops an acquisition policy•Invests US$ 4 billion in Latin America
x1995
1st 1000-Day Program launched
x19972nd
1000-Day Program launched
x
Business Strategies
•New banking model: branches to focus on selling to customers, not performing transactions•Increases the effective use of customer information
Building Dynamic
InformationCapabilitiesto Achieve
High IO
•IBV: Promotes transparent company culture & encourages employees to share information in & across branches •ITP: Develops a single IT infrastructure to integrate all channels •IMP: Sets up information management tools and processes; & trains employees on how to collect, maintain and use information
x xOct. 19,
1999BBV &
Argentaria merge
No clear strategy: internal political struggle; lack of leadership
•ITP: Builds a single IT infrastructure in Latin America •IMP: Changes partners’ systems & processes•IBV: “Cross fertilization” program to change management’s mind-set
x1988
Banco de Bilbao & Banco Vizcaya merge
1989One co-
chairman dies; Ybarra
becomes sole chairman
1994Uriarte initiates executive
meeting to develop transformation plan & starts road shows to
rebuild morale & establish sharing culture
Time & Milestones
Company transformation Expansion into Latin AmericaSet-back
Developing High IO
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Banco Bilbao Vizcaya Argentaria (BBVA): Executing Growth Strategies with Dynamic Information Capabilities
xFeb. 20003rd 1000-Day
Program launched -
CRE@; alliance with Telefonica
•Integrates 2 banks•Acquires more operations•Transfers banking model to partners to create a global BBVA brand & to leverage its technology, people, knowledge, and large customer base
xJan. 1, 2000Merger project starts
Business Strategies
xJune 2000
Acquires Bancomer
xOct. 19,
1999BBV &
Argentaria merge
Jan. 2001Merger project complete; buys out 2 banks in
Argentina & Colombia; drops some Telefonicaprojects.
x
Time & Milestones
Creating an International Brand
Building Dynamic
InformationCapabilitiesto Achieve
High IO
High IO
•Integrates systems & processes of the 2 banks’ global operations and other newly acquired operations, and creates an acquisition & merger capability
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Degree of perceived Customer
Value
High
Opportunities for Companies to Compete in This Business Environment
Low
Time
Current Trend
Degree of Product Innovation &
Customization
High
Low
Opportunity 1Opportunity 1
Lower value
Lower margin
High outputt1
Opportunity 1
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Opportunities for Companies to Compete in This Business Environment
Degree of perceived Customer
Value
High
Low
Time
Current Trend
Degree of Product Innovation &
Customization
High
Low
t1
Opportunity 1
Opportunity 2Opportunity 2
Higher value Highly differentiated
Targeting: The Best MarketsThe Best ProductsThe Best Customers
With high quality information and knowledge use !
Opportunity 2
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Degree of perceived Customer
Value
High
Opportunities to Compete Depend on Leveraging Information Capabilities
Low
Time
Current Trend
Degree of Product Innovation &
Customization
High
Low
t1
Opportunity 2
tf
High valueHigh IC
Opportunity 1
Low marginLow IC
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Scenario for Heavy Lifting
2000
150
5
Managers seek to leverage information, people and IT, but their people are reactive
and low on IO
5
2000
150
Scenario for Fully Mobilizing Your Investments in People, Information and IT
Managers lead their people to use information and IT to drive business performance
Mobilizing Information, People and IT in Your Company
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• The mindset and actions of the company’s managers are critical to effective information use and to achieving business results with information, people and IT capabilities
• Building the Company’s Information Capabilities is as much about people behaviors and information practices as it is about IT –management control plays a critical role!
• Leveraging information and knowledge for bottom-line impact is no longer « soft » or « intangible »: We can see, measure and leverage these assets by managing the Information Orientation of our company.
Lessons Learned about Competing with Information
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