Strategy Implementation

• E-C Value Creation

• Process Redesign

• Change Management

• IT Project Management

E-C Value Creation: Five Levers

• Time (cycle time reduction)

• Distance (overcome distance)

• Relationships (trust and loyalty)

• Interactions (chat, bboard, community)

• Product (enhancements, new products)

Value Creation: Time

Reduce cycle time

Quick order entry

Example: Amazon’s 1-click shopping

Extend business hrs.

24X7 Service

Example: 25% Grainger’s Web sales

Value Creation: Distance

Virtual presence Virtual network

Example: autobytel.com

Location independence

Real-time chat

Example: AOL’s Instant Messenger

Value Creation: Relationships

New intermediaries

Alter Role of Intermediaries

Example: FreeMarkets.com

Lock-in User Create switching costs

Example: OfficeDepot.com

Value Creation: Interactions

Get feedback Extensive User Feedback

Example: McGraw-Hill (betabooks)

Give control User Controls Information Access

Example: Otis e*Direct (Plan Your ProjectSM)

Value Creation: Product

Transactions to solutions

Help buy/sell used equipment

Example: Milacron

Decision support

Online Decision Support Tools

Example: Turner mania for media managers

Three types of Value Creation

• Efficiency or cost reduction

• Effectiveness or better decisions

• Strategic or competitive advantage

E-C Value Creation

Efficiency Effectiveness Strategic

Time

Distance

Relationships

Interaction

Product

Strategy Implementation

• E-C Value Creation

• Process Redesign

• Change Management

• IT Project Management

Process: A set of activities to produce output for customer/market

- Set of inputs + Ordered activities

- Cost, time, quality & customer satisfaction

- Dynamic view of how value is created

Focus: How, not just what

Organizational Structure: Cross functional teams

Process Definition

Examples of Cross-Functional Processes

Competitor Analysis &

Market Research

R & D Marketing ManufacturingNew

ProductNew Product Development

Business Proposal Commitment Configuration Credit Delivery Billing Collection Processes

Business Sales Manufacturing Finance Logistics Functions

New Product Development

Order Management

Automation vs. Reengineering

• Efficiency

• Functional

• Same old rules

• Control

• Low risk, low gain

•

•

•

•

•

Principles of Process Design

• Focus on outcomes, not tasks

• Do it yourself (Production buys from certified suppliers)

• Integrate information processing with real work (Ford)

• Treat distributed work as centralized (Global buying)

• Link parallel activities while in process, not at the end

• Match decision point with work location (empower)

• Capture information once, and at the source

Ford Purchasing

(1) Purchase Order

Vendor

Vendor

(2) Purchase Order Copy

(3) Receiving Document

Ford Receiving

Accounts Payable (500)

(5) Payment

Goods

(4) Invoice

Ford Purchasing EDI

GoodsFord Receiving

Accounts Payable (125)

EFT

EFT

Ford & Vendor Banks

Procurement Database

Ford’s Procurement ProcessBefore

After

Mortgage Loan Processing at BANC ONE

Closing

Closing

Laptop

Loan Input

Desk-to-Desk Approach: 17 days

Team Approach: 2 days

Role of Information

• Process performance monitoring (quality control)

• Process integration (information as process glue)

• Process customization (mass customization)

• Information rich processes (e.g., financial sector)

• Management processes (need external/informal data)

Organizational Enablers

Benefits: Wider skill set, Quality of lifeStructure:Team

Criteria: Leadership, Composition, Clarity of goals

Empowerment

Routines/Culture Participative decision making

Lateral communication

Incentives, Gain sharing

Compensation Career paths: More horizontal, less vertical

Work role rotation to create a shared mind set

Why is process re-design difficult?

Any major organizational change requires

•

•

•

Strategy Implementation

• E-C Value Creation

• Process Redesign

• Change Management

• IT Project Management

What is the new economy?

• A loosely defined concept to explain the stock market boom in 90s and Internet explosion!

• Earlier uses have described service economy, globalization, and corporate restructuring.

• The IT productivity paradox was finally set aside in late 90s.

• The longest economic expansion ending in Mar ‘01 was often attributed to the new economy.

Old vs. New Economy?

Industry Context• Low Complexity• Static

Strategy Formulation• Strategy to fit Industry

Strategic Lever• Plan for competition

Basis for Advantage• Entry & Exit Barriers

Industry Context• High Complexity• Dynamic

Strategy Formulation• Innovations• Network effectsStrategic Lever• Speed

Basis for Advantage• Organizational flexibility

Change Management

– Change is the only certainty in the business world!

– Assess the abilities & disabilities of the organization as a whole

– The ability of an organization to conceptualize and manage change enables it to compete from the inside out

– How can organizations change faster then their environment?

– How can mature incumbents effect change?

Organization Life Cycleand Change Challenges

Organization Life cycle Change challenges

Niche identification (Amazon)

Survival shakeout(Dot-coms)

Renewal(Whirlpool: Functional

to Business units)

Reenergizing

Entrepreneurial

Growth

Maturity

Decline

Restructuring

Bureaucracy bashing

Employee involvement

Continuous improvement

Cultural change

Right work

Improved work

Open/flexible

Closed/inflexible

Open/flexible

Renewal of Organizations

§ Many cannot renew within, and fall prey to consolidations, acquisitions and mergers.

How do organizations overcome the renewal challenge?

1. By altering their strategy, structure and systems.

2. By changing the mindset (accepted behavior / attitudes)

3. By focusing on customer perspective (external / internal

customer satisfaction in performance appraisal system)

4. By reducing cycle time (boundaries inside / outside)

5. By empowering employees who act as leaders

A Process for Re-energizing Mature OrganizationsC

hang

e/Im

pact

5. SUSTAINED COMPETITIVE ADVANTAGE (Magnitude of Long-Term Impact)

• Mindset • Leadership • Work

Employees no longer feel part of mature organization! 4. CONTINUOUSIMPROVEMENT

•Simplicity •Speed • ServiceFocus on “right” work!Su

pplie

s

Cus

tom

ers

3. EMPLOYEE EMPOWERMENT• Involvement • Job Design •

CommunicationProfit sharing, access to management!2. BUREAUCRACY “BASHING”

• Reports •Meetings • Approvals • Measures

Replace low-value work!1. RESTRUCTURING

• Downsizing • Delayering Be fair yet bold!

Time

Types of Organizational Change

Anticipatory

Reactive

Incremental Strategic

Tuning

Adaptation

Reorientation

Disruptive

Tuning

Adaptation

Reorientation

Disruptive

Inte

nsi

ty o

f Ch

ang

e

High

Low

What is Disruptive Change?

Sustaining Innovations

– Improve product in ways customers value

Disruptive Innovations

– A new market for a new product which is worse, not better, than competing products

– Incumbents possess capabilities to foster Sustaining Innovations, and disabilities to embrace Disruptive Innovations

1. Creating new capabilities internally: Pull the relevant people out of the existing organization, draw a new boundary around the new group, and create a new process. Examples?

2. Creating new capabilities thru a spinout: If you need a new cost structure or if the opportunity is small, a spinout may work. No need to compete with mainstream organization for resources. Often used by incumbent companies to deal with the Internet.

3. Creating new capabilities thru acquisitions: Easier if capabilities stem from resources only.

How Can Incumbents Manage Disruptive Change?

Common Change Implementation Problems

• Longer than anticipated

• Major new problem

• Coordination not effective

• Competing programs and crises

• Employee capabilities insufficient

• Training and instruction inadequate

• Uncontrollable external factors

Strategy Implementation

• E-C Value Creation

• Process Redesign

• Change Management

• IT Project Management

Investigation: Feasibility (Economic, Technical, Operational)

Analysis: Requirements Determination, Logical Design

Detailed Design: Technical Design, Coding & Testing, User Training

Implementation: File conversion, System Installation

Classical Systems Development Life Cycle

Identifyproblem

DevelopPrototype

InitialRequirements

WorkingPrototype

Convert to Production

System

Implement &Use Prototype

If PrototypeInefficient Problems

Next Version

NewRequirements

Revise & Enhance

Schematic of Prototyping

Requirements Determination

• Information Content, Accuracy, Coverage

• System Reliability, Response Time, Transaction Volume, Data Volume

• Changes in Input, Output, Processing, Database, Communication

Problems of Requirements Determination

• Human Limitations

• Variety & Complexity of Requirements

• Communication Problem

IT Project Evaluation

• Economic Feasibility

• Operational Feasibility

• Technical Feasibility

• Risk Assessment

Economic Feasibility

* Development & Operation Costs

* Tangible and Intangible Benefits

* Cost Benefit Analysis

* Payback Period

* Return on Investment

Operational Feasibility

• Management Support

• User Resistance / Involvement / Training

• New People Required

• Ease of Use

Technical Feasibility• Technology Required

• Technology Acquisition

• Schedule Feasibility

• Resource Requirement

• Skills Required

• Outside Help

Project Risk Assessment

• Project Size

• Project Structure

• Development Group

• User Group

Project Risk Assessment

Familiarity with Technology / Application

Project Size Low Structure

High Structure

High Large High Risk Medium Risk

High Small Medium Risk

Low Risk

Low Large Very High Risk

High Risk

Low Small High Risk Medium Risk