What’s Happening?!

1. What’s Happening?! Venture funding in Silicon Valley 22% in the 4th quarter--$1.7 billion. Venture capitalists are moving from trying to save older, struggling companies to investing in youngest start-ups—the ones most likely to hire new people. “These are the kinds of jobs that won’t be leaving the country.”

2. Andy Grove’s Five Key Principles Enjoy your work. It is impossible to like all of it. Most people will like their work if they feel that what they do makes a difference. • 2. Be totally dedicated to the end result. • Not how you got to it. • Or whose idea it was. • Or whether you look good or not.

3. Andy Grove’s Five Key Principles 4. Be straight with everyone. 3. Respect the work of all those who respect their own work. 5. Always, when stumped, stop and think your way through to your own answers.

4. Course Schedule Section I and II of ATP is due a week from this Thursday. Midterm exam pushed back to Thursday, Feb. 12. Midterm exam clinic on Thursday, Feb. 5 at 6 to 7 PM.

5. 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

6. 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%

7. Chapter 5 Summary Information Systems Can Redefine Competitive Boundaries

8. Chapter Topics A. Interorganizational Systems B. Strategic Business Alliances C. Electronic Data Interchange (EDI) (extranets versus EDI) With an added dose of globalization.

9. Interorganizational Systems Interorganizational Systems are defined as automated information systems shared by two or more companies. • Enhance business relationships. • Establish strategic alliances. • Gain efficiencies. • Gain effectiveness. • Lower cost of doing business.

10. Interorganizational System Goals • Efficiency • Effectiveness • Competitive Advantage

11. Interorganizational Systems • Is this just another name for outsourcing? • Is there any difference between sending work from Santa Cruz to San Jose and sending it from Santa Cruz to Bombay? The trend is not new and may be overstated. According to Gartner, 10 per cent of info tech jobs with US based technology companies will be based in countries in emerging markets by the end of 2004. It is unlikely that the federal government will do anything to limit or ban outsourcing.

12. Strategic Alliances How (why) do they work? • Companies bring strengths to the alliance table. • Alliances create long term advantages. • Alliances drive business growth. • Alliances often represent a difficult transition.

13. Strategic Alliances Why establish a strategic alliance? • To build a combined capability that makes it a stronger competitor. • Extended enterprise against the competitor’s extended enterprise. • Difficult, costly and risky to try to deal with the challenges of a global business.

14. EDI Electronic Data Interchange (EDI) (Predecessor to extranets) Exchange of routine business transactions in a structured computer-processed format. Traditional applications included purchasing, pricing, scheduling, payments and financial reporting.

15. Why stay with an EDI system? • It is established and proven. • The network costs are not large enough to justify switching to an extranet approach. • There are other priorities within the organization.

16. Global Motivation Offense/Defense—Opportunities/Threats Global economies of scale to recoup R&D and capital costs. Build and strengthen global brands—economies of scope. If your competitors have established a global position do you really have a choice as to whether you should also compete on a global basis? Acknowledge the better standard of living and increased mobility of a greater number of people in countries around the world.

17. Possible Exam Questions • Explain the term extended enterprise and the possible benefits for a company in establishing a competitive position. • Explain and contrast the current extranet emphasis with the more traditional EDI approach.

18. Chapter 6 Introduction Business Vision By Steven Levchenko

19. Section II The Company Environment • Business Environment • Specific Industry • Enterprise Environment • The Company Itself • IT Environment • Used for competitive advantage Business Success

20. Business Vision • “To carry out its work, the organization needs from its leader a clear statement of its vision and strategy.” • Max DePree, • Herman Miller, Inc.

21. Business Vision The primary intent of this chapter is to position vision as the starting point in directing, posturing and running a business. Two company examples are provided: USAA Whirlpool The major point to remember is that vision triggers the entire business and information technology management process.

22. Business Vision Process Sensing Opportunity Vision Leadership Strategy Tactics & Business Plan Agreement/Commitment Implementation Feedback

23. Leadership A major premise of this course is that successful companies are the result of good leadership in two forms: • Companies need to be run well from an • operational standpoint. • They also need to be well directed and this is • accomplished through an effective vision that is • communicated throughout the organization.

24. Chapter 6 Business Vision

25. 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.

26. The essence of competitiveness is vision, leadership and a hunger to succeed. P. R. Vagelos Chairman and CEO Merck

27. 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.

28. Jack Welch Vision for GE His vision was for GE to become the most competitive enterprise on earth. He 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.

29. 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.

30. Microsoft Vision Empower people through great software, anyplace, any time and on any device.

31. Values Beliefs Principles C u l t u r e Mission Goals Vision Strategies Tactics Objectives and Measurements Authority and Responsibility Business Plan

32. George Bush: The Vision Thing His inability to grasp "the vision thing" was an important part of George Bush's undoing in the '92 election; but he's not the only one to have a hard time articulating wishes and dreams for the future. 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. Mission, values, and vision are the glue that holds an organization together.

33. Gerstner’s Lack of Vision for IBM Lou Gerstner caused a stir at his first major press conference when he declared that the last thing IBM needed was to proclaim a grand vision. Gerstner proceeded to focus on cost-cutting and other management issues and proved the vision- hungry pundits wrong.

34. 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."

35. Gerstner Approach Gerstner constantly asked managers, "What are your customers telling you? Do you understand your market? Have you segmented your market?" Managing change in the fast-paced technology business is extremely challenging and difficult to master.

36. Gerstner Approach He managed IBM like the customer that he used to be. He had major discipline in how he used his time. He shifted IBM’s primary focus from hardware to services and from mainframes to the Internet and software.

37. 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.

38. 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

39. 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 Figure 1-4

40. A Shared Vision Positions IT 1. Achieves Strategic Synergy. 2. Puts the Onus on the Owners. 3. Leverages Learning. 4. Extends Externally. 5. Chucks the Organization Chart. 6. Indulges in Information. 7. Makes a Bee-line for Benefits.

41. “The Vision Trap” Grand, abstract visions can be too inspirational. The company may wind up making more poetry than products. Gerard H. Langeler President, Mentor Graphics

42. Implementation (Action) The Vision to Action Process Agreement & Commitment Tactics and Business Plan Strategy Feedback Vision Sensing Opportunity Figure 6-1

43. Vision Examples • Robert McDermott at USAA • David Whitwam at Whirlpool • Peter Lewis at Progressive Corp. • Gil Amelio at National Semiconductor

44. 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 Gerstner, IBM Akio Morita, Sony Lee Kuan Yew, Singapore, Inc.

45. 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.

46. Information systems are strategic weapons, not cost centers. Robert F. McDermott, Former USAA CEO

47. 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.

48. USAA Vision 2000 An Events Oriented Organization Member (Customer) Needs Wants Key Points Security Quality Asset of Life Management Supporting Insurance Consumer Financial Systems Products Services Services Products Products Figure 6-2

49. USAA’s ultimate goal is to manage its customer relationships and not its individual products. How does this relate to information systems?

50. USAA Videotape