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Using IT as a Competitive Weapon

Using IT as a Competitive Weapon. Group 2 Joe Brennan Michelle Goff Bruce Eli Johnson Laura Paulick Kenny Yeung. Col. John Boyd USAF. Father of the F-15 Father of the F-16 Aerial Attack Study First Training manual for fighter Pilots Patterns Of Conflict

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Using IT as a Competitive Weapon

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  1. Using IT as a Competitive Weapon Group 2 • Joe Brennan • Michelle Goff • Bruce Eli Johnson • Laura Paulick • Kenny Yeung

  2. Col. John BoydUSAF • Father of the F-15 • Father of the F-16 • Aerial Attack Study • First Training manual for fighter Pilots • Patterns Of Conflict • Concept of “fourth generation warfare” • “Asymmetric Warfare”

  3. American F86 Saber vs. Soviet MIG-1510-1 kill ratio in Korea, why?

  4. OODA Loop • Observe Orient Decide Act • Saber pilots sat higher, joystick was hydraulic. • “We have to get inside their decision cycle”

  5. OODA Loop

  6. OODA Loop • Information Technology that moves one through the OODA loop faster will give a Competitive Advantage and be a weapon.

  7. Optimizing the Value Chain“How Information Technology Gives you Competitive Advantage”Michael E. Porter and Victor E. Millar Harvard Business Review 1985 • Value Chain • Activities connected by linkages • Tradeoffs • Coordination • Physical and Information component • To gain competitive advantage over rivals a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium price. • Information Technology • allows you to build more value into the product • helps to exploit the linkages • improve coordination

  8. Nature of ITReview 9/28/2003

  9. Nature of ITReview 9/28/2003 • Critical-differentiators serve to differentiate a company from their competitors in the minds of their customers. Focus on service excellence. • Critical-commodities are systems that everyone in the industry has, but whose operations are critical. Focus on service excellence. • Useful commodities are standardized IT products and services. Focus on low costs. • Useful differentiators are expensive distractions which need to be eliminated or migrated

  10. IT FOR COMPETITIVE ADVANTAGE • Owens & Minor • Joe Brennan • Political Fund-raising • Laura Paulick • OnStar • Michelle Goff • Bruce Eli Johnson • Conclusion • Bruce Eli Johnson • Kenny Yeung

  11. IT FOR COMPETITIVE ADVANTAGE OWENS & MINOR

  12. Owens & MinorBackground • 118 year old distributor of medical and surgical supplies. • Fortune 500 company headquartered in Richmond, VA. • $3.96 billion in sales • Net Income of $48.7 million • Gross Margin 10.6% of sales Owens & Minor Annual Report 2002

  13. Owens & MinorIT Organization • The CIO, David Guzman reports to the CEO, Gil Minor. • The IT budget is traditionally 1.2% of revenue. • IT operations outsourced to Perot Systems. • 165 people work on Owens & Minor Perot team, 28% involved with new development. Information Week 9/22/2003

  14. Owens & MinorIT OrganizationDavid Guzman, CIO • Family migrant farm workers from Puerto Rico who settled in NJ • Single mother household • Welfare • Worked in a textile mill at 12 • Yale on academic scholarship • Fist Fights with uncle • “pajaritos de ambicion en tu cabeza” • “little birds of ambition in my head” Information Week 9/22/2003

  15. Owens & MinorCore Competency • “We are in the box moving business”, says CEO Gil Minor. “That is our core competency, that got us to the dance-getting the order there on time everyday, properly billed, the way the customer wants it, it’s fundamental block and tackling. Believe me if you mess around with that you’re really going to fall on your face.” Virginia Business 11/2001

  16. Owens & MinorEnvironment

  17. Owens & MinorEnvironment • For every dollar hospitals spend on supplies they spend another 40 cents on supply chain logistics. • Hospitals buy $25 Billion worth of medical and surgical supplies each year. • Very narrow margins-10% or less Information Week 9/22/2003

  18. Owens & MinorEnvironment • “Distributors of products don’t have much say in prices, but they can help facilities manage their costs by focusing away from product costs”, according to Christopher D. McFadden, VP of global investment research for Goldman Sachs & Co. in New York. Virginia Business 11/2001

  19. Owens & MinorTraditional Distribution Business Model

  20. Owens & MinorWISDOM • Wisdom-WebIntelligence Supporting Decisions from Owens & Minor • Web-based decision support tool that allows buyers a consolidated view of their information because it interfaces with the health care companies ERP, material management and clinical systems. • Helps hospitals monitor purchasing data and contract compliance via the internet. Information Week 9/22/2003

  21. Owens & MinorWISDOM Impact • Wisdom was key to winning 60million in new business and expanding existing business by 100million in first year.1999 • In 2001 over a third of OM projected 3.8 Billion in sales will flow through wisdom • Sales has grown every year since Wisdom has been instituted growing from 3.19 billion in 1999 to 3.96 last year in 2002. • Sales in the current year are projected to easily surpass 4 billion • Profit has grown from 28 million in 1999 to 48.7 million last year. This year profit is expected to hit a new record. • Revenue increased 10 percent in 2000 to 3.5 billion, a company record. Overall gains by competitors is about half that rate. Owens & Minor Annual Report 2000, 2001, 2002

  22. Owens & MinorWISDOM Impact • Received Leadership Award from the Data Warehousing institute 1999 • Ranked #1 Information Week 500 2001 • Ranked #11 Information Week 500 2002 • Ranked #1 Information Week 500 2003 InformationWeek

  23. Owens & MinorWISDOM Impact • Senior Management have come to view the Data Warehousing initiative as being so strategic that the director of decision services, Don Stoller was moved from the IS department to marketing. Owens & Minor "Wisdom Provides a Competitive Advantage at Owens & Minor" June 2000

  24. Owens & MinorHistory of Wisdom • 1995 OM purchased Stuart Medical • Doubled the company from $1.5 to $3 billion • Struggle to manage to dissimilar cultures • First annual loss in 114 years • 1998 Company unexpectedly lost two major contracts worth $400 million in annual sales. Owens & Minor "Wisdom Provides Competitive Advantage at Owens & Minor" June 2000

  25. Owens & MinorHistory of Wisdom • 1996 Don Stoller was brought on board to head up data warehousing and decision support systems. • Initially focused on supporting internal users who accessed data using BusinessObjects, a leading client-server query/reporting tool. Owens & Minor "Wisdom Provides Competitive Advantage at Owens & Minor" June 2000

  26. Owens & MinorHistory of Wisdom • Oct. 1997 the warehouse team started to investigate moving to the web. • Productivity-customers were asking OM’s sales reps for more and more information. 30 reports/month • Greater Flexibility-Many users did not need the full functionality provided by BusinessObjects. • Revenue Generator-Could charge for the service and be self sufficient profit center. • Competitive Advantage-OM was the only health care company positioned to offer such a service • Oct. 1999 WISDOM is formally launched • Spring 2000 WISDOM2 launched Owens & Minor "Wisdom Provides Competitive Advantage at Owens & Minor" June 2000

  27. Owens & MinorWisdom2 • Decision support data and purchase history for all supplies bought be a health care company. • This includes products the OM does not distribute such as pharmaceuticals, patient food, and linens and scrubs. Ownes-Minor.com

  28. Owens & MinorWISDOM Benefits for Health Organizations • Contract Compliance • Product Standardization • Product Utilization • Product Usage • Service Level Tracking Owens-Minor.com

  29. Owens & MinorWISDOM Benefits for Suppliers • Sales and Service Levels • Contract Utilization • Dropship Analysis • Sales penetration Analysis • Inventory Levels Owens-Minor.com

  30. Owens & MinorWISDOM3? • Automated replenishment via Web-services Information Week 9/22/2003

  31. IT FOR COMPETITIVE ADVANTAGE POLITICAL FUND-RAISING

  32. Competition to Raise Funds • “Company” : each candidate who wants to raise money • Presidential Election: 2004 • Candidates compete to raise funds • Democratic candidates compete with each other • Democratic candidates compete with George W. Bush as the Republican incumbent

  33. Direct Mail Fund-raising • Traditional fund-raising: by direct mail • Survey by the Mellman Group in 1999 • Direct-mail reaches 12 million potential donors • Two-thirds of these donors are age 60 or older • Limitations of direct mail: • finite • Aging • Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

  34. Internet Challenge to Direct Mail • This class reached by direct mail is dwarfed by the potential internet market • 50 million people have access to the internet and report giving time and money to social causes • Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

  35. Internet: Advantages • Internet has low-cost processing • Less expensive than via direct mail • “Everybody now is looking for more efficient ways to raise the hard money at the least amount of cost” • Carla Eudy, Finance Director for John McCain, 2000 Source: The Left’s Mr. Right, Newsweek, August 11, 2003

  36. Internet Fund-raising: History • June 1999, Federal Election Commission permitted federal matching funds for credit-card donations over the Internet • Former Democratic Presidential Candidate Bill Bradley lured thousands of younger, first-time givers to donate through his Web site • Was yet to utilize full potential of web donations Source: The Left’s Mr. Right, Newsweek, August 11, 2003

  37. Fund-raising: Potential • By 2004, the Internet is expected to generate 25% of all contributions of $100 or less • Internet enables candidates to broaden their appeal • Internet attracts more “low-dollar” donors Source: The Left’s Mr. Right, Newsweek, August 11, 2003

  38. Competition • Dick Cheney went to South Carolina, raising $300,000 at a $2,000-a-plate lunch Source: The Left’s Mr. Right, Newsweek, August 11, 2003

  39. Howard Dean’s Web site ran this photo of him eating a turkey sandwich; he raised $500,000 Source: The Left’s Mr. Right, Newsweek, August 11, 2003

  40. Success of Howard Dean’s Internet Site • Howard Dean raised three times as much money in the last three months as his Democratic competitors • Dean’s fund-raising in the last three months: • fed by thousands of small Internet contributions • financial front-runner in the nine-way race • The fund-raising of some of his rivals declined in recent months. • Dean raised at least $14.8 million in the last three months, closing the quarter with at least $12.4 million in the bank. He has raised $25.4 million this year Source: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, 2003

  41. Success of Howard Dean’s Internet Site • He compiled tens of thousands of small donors, many of whom gave over the Internet • Internet contributions accounted for about half what was brought in this quarter • Fewer than 1 percent of the campaign's contributors had reached the maximum $2,000 that an individual can give to a presidential candidate • The campaign may be able to continue to draw money from its base of donors • Though the campaign fell slightly short of its $15 million goal, it set a single-quarter record for a Democrat in a presidential race. Source: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, 2003

  42. Result of Fund-raising Success • If the Service Employees International Union decide to endorse, Howard Dean could get the backing of the largest union of the AFL-CIO • Huge blow to Dick Gephardt’s campaign • Unions initially overlooked Dean as a marginal candidate. That changed when he surged in fund-raising Source: www.cnn.com/2003/ALLPOLITICS

  43. Contribution Plans Source: www.deanforamerica.com

  44. Monthly Contribution Plans • Democratic Party effort to build a base of small regular donors • Same marketing used in infomercials: • people can have donations automatically charged to their credit cards each month • Match the base accumulated over the years by the Republicans • Push within the Democratic Party to fill that void • Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

  45. Monthly Contribution Plans • The plans appeal to constituents on more modest incomes who have to work within monthly budgets. • In the Gephardt campaign, the average donation is $17.08. • ''A hundred dollars is a lot for someone who makes $300 a week,'' ''But I don't miss $5 a week.'' • Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

  46. Role of New Campaign Finance Regulations • Monthly contribution plans also act in response to these new regulations • Individual contributions are capped at $2,000 Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

  47. Effects of Regulations on Competition • ''The reason that the Democrats are now having to play catch-up is because the new campaign finance laws prevent them from being funded by a small universe of very wealthy people. They are forced to find new contributors.'‘ • Christine Iverson, a spokeswoman for the Republican National Committee Source: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times, October 15, 2003

  48. Democrats Compete with Republicans • During the last election cycle: • Two-thirds of the money from small donations ( less than $200) went to Republicans • The Democrats received 92 percent of unregulated contributions over $1 million. Source: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times, October 15, 2003

  49. Democrats Compete with Republicans • Social conservative groups have helped the Republicans strengthen a small regular donor base using direct mail to tap into single-issue constituencies • gun control • abortion • Religion Source: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times, October 15, 2003

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