LECTURE NOTES - FROM E-COMMERCE TO E-BUSINESS

Introduction• New Economy, New Tools, New Rules

– The streamlining of products, interactions, and payments between customers -companies - suppliers

– Structural transformation of internal foundations– Three questions businesses must answer

•How will e-commerce change our customer priorities?•How can we construct a business design to meet these new customer

priorities?•What technology investments must we make to survive, to thrive?

– Are you and your organization ready to build a strategy to be a player in e-business?

– What makes a company successful in e-business

• Examine your world - your organization– Look at the problems preoccupying senior management and look at current

priorities: market share versus short-term profit, revenue growth versus cost•What are the high profit projects directed toward accomplishing these

priorities•Consider the digital future, how will you compete with firms that don’t

have your company’s baggage: legacy application, calcified processes,inflexible business models, etc.

– Question your Company’s strategy•Does your senior management clearly understand the changes to your

industry caused by e-business?•Any blind spots, flawed assumptions?•Does senior management recognize the threat posed by new

unconventional rivals?•Will changes to the business model Be too late?•Are the right priorities being set and executed?

– Are you and your company really ready to execute change?•Understand the implementation side of strategy?•Know that business platform is being transformed by a new generation of

enterprise applications?•Understand the risks, challenges and problems arising from engaging in e-

business?

Rules for Doing E-Business

Rule 1: Technology is no longer an afterthought in forming business strategy, but the actual cause and driver.

Rule 2: The ability to streamline the structure, influence, and control of the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products.

Rule 3: Inability to overthrow the dominant, outdated business design often leads to business failure.

Rule 4: The goal of new business designs is to create flexible outsourcing alliances between companies that not only off-load costs, but also make customers ecstatic.Rule 5: E-commerce is enabling companies to listen to their customers and become

either “the cheapest,” “the most familiar,” or “the best.”

Rule 6: Don’t use technology just to create the product. Use technology to innovate,entertain, and enhance the entire experience surrounding the product, fromselection and ordering to receiving and service.

Rule 7: The business design of the future increasingly uses reconfigurable e-businesscommunity models to best meet customers’ needs.

Rule 8: The tough task for management is to align business strategies, processes, andapplications fast, right, and all at once. Strong leadership is imperative.

Figure 1: The Rules of E-Business

• Technology is no longer an afterthought in formulating business strategy, but theactual cause and driver– If any entity in the value chain goes cyber, companies up and down the chain

must follow suit or be substituted.– Currently executives are least aware of the magnitude of the affect of e-business

-- lack vision– E-business is about structural transformation -- revolution of the rules of

business– Managers must learn to see differently

• The ability to streamline the structure and to influence and control the flow ofinformation is dramatically more powerful and cost-effective than moving andmanufacturing physical products.– Core driver of structural transformation– Changing the flow of information requires changing the product mix and the

business ecosystem in which you compete– “Future shock” is real -- failure to change ⇒death– To thrive, companies need to be in a state of perpetual transformation -

constantly creating fundamental change.– i.e.: 1980 Digital & IBM own PC market but Compaq, Dell & Gateway took

over.

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• New business design goal is to create flexible outsourcing alliances betweencompanies that not only off-load costs, but also make customers ecstatic.– Recurring theme that firms are implement to fashion new business models:

disaggregation and reaggregation-Intel with constant chip innovation is a goodexample

– Objective of reaggregation is to either lower cost or enhance differentiation(using technology)

– Steps to disaggregation and reaggregation•challenge traditional definitions of value•define value in terms of the whole customer experience

• Inability to overthrow the dominant, outdated business design often leads tobusiness failure.– E-business requires flexible business designs– Outsourcing strategy necessary but insufficient, e.g.: Amazon.com against

Barnes & Noble as Yahoo against Microsoft Net

• E-Commerce is enabling companies to listen to their customers and become either“The cheapest,” “The most familiar,” or “The best”– Best example of value - oriented format is Wal-Mart– “Most familiar” example is McDonald’s– American Express exemplifies being the best– Executives need to ask:

•Is there an Amazon.com that can squeeze my margins?•If not, can I create one?•Any new entrants in my market that are leveraging the WEB to rewrite

the rules?

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•engineer end-to-end value stream•integrate, integrate and integrate•create a new generation of leaders, not digital designers

– Challenge traditional definitions of value, continuously improve:•speed - service can never be too fast•convenience - integration along supply chain•personalization - customize to the individual•price - nothing can be too affordable

– Domino set the new standard in pizza delivery– View the world through the customer’s eyes.

• Don’t use technology just to create the product. Use technology to innovate,entertain, and enhance the entire experience surrounding the product, fromselection and ordering to receiving and service.– Amazon.com, example of great user - interface that bundles experience

innovation and brand building.– Amazon.com achieved a very high customer loyalty, 58%– Amazon.com real trick is providing satisfying front-end and back-end

experiences– Microsoft new ventures:

•Expedia travel sales 5-10 million a week in less than 3 years•Car Point provides auto information•Microsoft Investor full service support to investor w/links to trader

– To create the future a company must be able to engineer the entire end-to-endvalue stream.

• The business design of the future increasingly uses reconfigurable e-businesscommunity models to best meet customer’s needs.– Competition is no longer between companies, but between EBC’s– E-business car dealer community

•AUTO-BY-TEL is revolutionizing car buying•Reinvented the business model for buying, selling and financing cars•free to customer, dealers pay fee•auto manufactures re-think the future of car dealerships

– How should we organize the opportunities that don’t fit the current model?– What skills and competencies must we build now to create the new value

stream?– Integrate, Integrate, Integrate– Most firms don’t have integrated infrastructures– Customers now have more choices, they are no longer willing to tolerate

inefficient services.– Barriers to integration: process inefficiencies, lack of application integration,

fragmented information and lack of accurate information– Creating business value out of technology

•Fed Ex - spends 1 billion $ per year on IST•Partnering with customers, i.e.: Nation Semiconductor

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• The tough task for management is to align business strategies, processes andapplications fast, right and all at once. Strong leadership is imperative.– Leaders’ greatest challenge: gain deep knowledge of her/his business and decide

to stay with the status quo or enter the chaos, risk and uncertainty of newproducts and services

– Recover the entrepreneurial spirit from which the company sprouted.

–The tuff part of e-business is getting strategy implemented -- less than 10%of strategies are actually implemented–E-business Execution Framework

•Provide a structure for defining, communicating and monitoring newrealities•redesign core business process to align with new organization vision•enable IT infrastructure to support change, innovation and businessgoals

–The failure is a management problem, not a technical issue–Needed a new generation of e-business leaders.

LECTURE NOTES - E-BUSINESS TREND SPOTTING

Introduction

• What are the implications of e-commerce on the form and function of the 21stcentury organizations?

• The tension between the old guard and rival upstarts is palpable

• Increasingly, the tussle between new and old centers on new distribution channels

• Differentiating between fads and trends– Fads catch on quickly, spread and then die quickly– Trends are global, tend to last 5 to 10 years

• Trend spotting has become a “plan or be planned for” issue

• Consumer trendsSpeed of serviceSelf-serviceIntegrated solutions, not piecemeal products

• Service/Process trendsConvergence of sales and service: Customization and integrationEase of use: Make service consistent and reliableFlexible fulfillment and convenient service delivery: Streamline your supply

chain.

• Organized trendsContract manufacturing: Becoming brand intensive, not capital intensiveRetain the core, outsource the rest: Business process outsourcingIncreasing process transparency and visibilityContinuous innovation and employee retention

• Enterprise technology trendsEnterprise applications: Connect the corporationInfrastructure convergence: Increasing melding of voice, data, and videoMultichannel integration: computer telephony integration and voice recognitionWireless applications enter the mainstreamLeveraging legacy investments: The rise of middleware for application integration

Figure 1 - Major Trends

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Trends

• Increase speed of service: for the customer, time is money– Why delays occur

•Duplicate + data entry - little integration of IS•Common ailment afflicting many companies•Large $ in ERP

– If your company doesn’t make it easy for the customer to do business,someone else will

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• Empower your customer: Self-Service– Customers embracing 7/24 self-service systems

•Demise of intermediaries•Gateway computer - design, configure, order, pay•E-trade - disintermediates the broker•Travel Industry - lowers cost, resolves the need for expensive

physical facilities– Service organizations -- customer push for self-service is dramatic– Established companies at a disadvantage over new starts, they require

integration of existing systems

• Integrate your sales and service: customization and integration– The average company loses half of its customers every 5 years– It costs 5 to 10 times as much to attain a new customer as it does to keep an

existing one– Cross selling and up selling strategies

•Sell while serving customers•Typically sales and service viewed as separate function•i.e.: Home Depot - perpetual service mode•Give customers fast, accurate, consistent information•Service - before, during and after the sale

– Customer relationships are the key to business growth

•Provide Integrated Solutions, not piecemeal products–Good example: Microsoft Office Suite -- do you shop individually for wordprocessors? Spreadsheets?–Core design objective in products is seamless integration–One-stop, life-path providers

•Wal-Mart superstore - sell more to each customer/convenience•The GAP - effectively markets image/collection of products•Toys”R”us - grows with customer/babies, kids, toys

–Customers want integrated - service - offering businesses that solve theirone-stop shopping needs–Integrated solutions make customers’ decision process easier.

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• Contract Manufacturing: Become brand intensive, not capital intensive– Asset intensive ⇒ e-commerce virtual manufacturer– Contract manufacturing roots in high-tech industry– Sun Microsystems story - beat the rate!– Trend toward specialization (marketing vs. manufacturing) means the company

focuses on what it does best– More profits from fewer assets

• Provide flexible fulfillment and convenient service delivery– Bring service to the customer, don’t wait for customer to ask– Gevalia’s integration story– Development of integrated supply chain is by far one of the most important

business trends

• Ease of use: Make customer service consistent and reliable– AT&T $0.00 bill story– Has something similar happened to you?– As service gets better, customers expect more & better service– Single point of contact required– Sharing information beyond company boundaries - key to dependence on third

parties for support– Requires adopting integrated applications

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• Learn to outsource: You cannot be good at everything– Business process outsourcing (BPO) ⇒ cost reductions– BPO also facilitates entering and creating new markets rapidly– BPO ⇒ flattening the organization ⇒ horizontal business processes– BPO is a way to create a true virtual enterprise– BPO strategies herald the beginning of a new era

• Increase process visibility: Destroy the black box– Process visibility implies customers need access to order status, product

information, pricing and availability– Process visibility ⇒ greater demand– i.e.: United Parcel Services (UPS) tracking system-- Customers can track

shipments in air, ground, water; anywhere..anytime– Process visibility especially important in business to business commerce– Solectron story - STARS shop-floor tracking & recording system. Customer can

track products through assembly and testing– Process visibility requires companies to build internal applications and processes

that open the black box– Allows for increased accountability– Process visibility ⇒ competitive edge through increased long-term customer

relationships

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• Learn the trends in employee retention– The enterprise, to succeed, must become a learning organization– Nordstrom's story - how to do it

•Always please the customer•90% of sales come from 10% loyal customers•key to success is its employees•Exceptional incentives to motivate employees•Employees given broad latitude and autonomy•⇒ entrepreneurial zeal in the stores service

– Trends in employee retention•Better incentives and compensation•Earned advancement•Better motivation

– Old ways of command and control over knowledge workers will not work well inthe future - e-commerce

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• Integrated enterprise applications: Connect the corporation– Integration is the key to unlocking information and making it available to any

user, anywhere, anytime ⇒ success– Why is integration so hard? - discuss w/class subsystem optimization ⇒

system suboptimization– Market for Enterprise Software Applications: ERP, i.e.: SAP, Peoplesoft,

BAAN, etc. represent the backbone of the modern corporation– Buy versus build, build ⇒ crisis of complexity, buying ⇒ relief from time-to-

market pressure– Differentiate between packaged application support and takeover.– 2001: A Space Odyssey - HAL story– Refer to Jacobs and Whybark new book: “Why ERP?…”

• Meld voice, data and video– Major trend in infrastructure for e-business in the convergence of various data

and voice transport networks– Convergence based on internet protocol IP, packet switching layer– Many minitrends occurring simultaneously:

•The race to improve the last mile bandwidth - biggest problem/barrierto internet usage.

•The race to provide quality of services - dial tone of today to the Webtone of tomorrow.

•The race to dominate the customer home contact point - multiplecontact points at home ⇒ proliferation of network appliances

– EnergyOne example - offers phone, security, gas, electric, etc.– Telephone over the internet– The infrastructure of e-commerce is in its infancy and evolving quite rapidly

• Multichannel Integration: Look at the Big Picture– Customer expect consistent service regardless of the channel they use - web,

direct dial, voice response, kiosk, etc.– Multichannel service integration is a management, not a technical issue– The level of technical investment required to create integrated services in huge– Long term trend ⇒ more work than people now realize

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10• Wireless applications enter the mainstream

– As wireless infrastructure develops a new wave of consumer and businessapplications will emerge

– First generation devices: cellphones, Palm Pilots, Nokia’s Communicator aregaining market share

– Real potential of wireless applications lie in the enterprise applicationsmarketplace

•Pushing data to decision maker via wireless

• Middleware: Supporting the integration mandate– We are becoming more customer-centric– Need to integrate legacy applications of the 1970’s with modern applications

creating a seamless process integration– To meet the integration needs middleware is emerging

•Middleware is the glue between the applications - mainframe andInternet

– 500 largest US IT user to spend $97 billion on IT products and services thisyear.

– Middleware prolongs the life of existing systems there by generating cost-savings

– Middleware trend plays an integral role in creating customer-centric,distributed and virtual organizations

• What is common to all these trends?– Effectiveness - directly affects the relationship between the enterprises’

customers and its environment– Efficiency - affects the internal structure and operating activities of the

enterprise– Integration - push for one-stop shopping consolidation– Paradox: companies with best resources to take advantage of new trends are

often least structurally capable of taking advantage of them.

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LECTURE NOTES - THINK E-BUSINESS DESIGN, NOT JUST TECHNOLOGY

Introduction

Today strategist need to get it right the first time in cost, time to market, and quality• What sets the truly great organizations apart is their ability to use the state-of-the-art

technology to transform themselves. They do three things well:– Redefine value for their customers– Build powerful e-business designs that out perform the competition– Understand customer priorities and constantly raise customer expectations to

new heights• Today’s focus is business design not process design• Business designs are strategic weapons in the digital economy• Business design is at the core of corporate strategy• Questions to be answered before creating innovative business designs:

– What business designs make your customers’ experiences unique andmemorable?

– Does your design meet your customers priorities - now? In the future?– What competencies and capabilities do you need to create rich experiences for

customers?– How much do you manufacture? - outsource?– Are your structures processor or function oriented?– How do you tailor legacy infrastructure to meet new requirements?

The First Step in E-Business Design: Self-Diagnosis

• Ask yourself these questions:– Has a recent wave of technology created new ways of doing business?– Is your company responding to changing customer expectations?– Is your company willing to question and change industry assumptions?– Can you succeed in lowering operating costs while becoming more flexible and

adaptive?• If all your answers were yes

– You are an innovator or market leader• If most of our answers were yes

– You are an early adapter or visionary• If most of your answers were no

– you are a new member of the silent majority– You are either a pragmatist, old-guard conservative, or die-hard skeptic

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The Second Step: Reversing the Value Chain

• Greatest challenge is linking emerging technology to new business design• success depends on creating new product offerings in which the customer sees value• Today companies don’t just add value, they invent it.• Business design is an outside - in approach

– the strategy revolves around the customer– Reversing the value chain - see Figure 3.1– Becomes critical in times of structural transitions, when old categories become

obsolete• E-business design is inextricably linked to the management of change

The Third Step: Choosing a Narrow Focus (Pick one)

• Service Excellence - delivering what customers want with hassle-free service andsuperior value

– Operating principles of service excellence:•Prepare your company for the unforeseen•Gather and maintain all the up-to-date, accurate information you need,

where you need it and when you need it•Employ customer contact management•Develop a forward thinking customer service philosophy

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The Third Step: Choosing a Narrow Focus (Pick one) - Continued

• Operational Excellence - delivering high quality products quickly, error-free, and fora reasonable price.

– Principles for success in operational excellence:•Efficient leveraging of assets•Management of efficient transactions•Management of sales intelligence•Dedication to measurement systems•Management of customer expectations

• Continuous innovation excellence - delivering products and services that pushperformance boundaries and delight customers

– Continuous innovation is based on the following principles:•Risk-oriented management style•Growth by merger and acquisitions•A market-education style•Encouraging innovation

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Case Studies - Discuss Each in Class

• Service Excellence at American Express– Regularly betting the company on innovative products and services– AMEX business over view– Service strategy leads the way– Lessons learned:

•In financial services, technology is not a luxury, it is absolutely mandatory• Operational Excellence at Dell Computer

– Michael dell starts early - grossing 80K $ per month from his dorm room in1984

– Company over view– Build-to-order e-business design

•Superb low-cost manufacturing and fast product development•End-to-end operational excellence•Flexible and agile supply chain (discuss)

– Lessons learned:•Make the internals of the company agile enough to respond to the ever-

changing and ever-increasing needs of customers•Requires a supply chain excellent in anticipating and responding to change

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Case Studies - Discuss Each in Class - continued

• Continuous Innovation at Cisco Systems– Cisco believes that continuous innovation demands that:

•Organizations build on change - not stability•Organize around networks - not hierarchy•Based on interdependence with partners•constructed on technological advantage - not bricks and mortar

– Company over view– Exponential Growth: Playing the acquisition game

•30 acquisitions in five years– Continuous Innovation via acquisitions

•Strategic level - quick fix•Tactical level - new product line adds revenue

– Lessons learned:•The challenge is to manage a loosely coupled structure while continuing to

provide seamless product integration to the customer

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Case Studies - Discuss Each in Class - continued

• Business Design Lessons Learned– Technology is the only common thread in all cases– Be customer focused

•Most difficult, more perilous, most vital– Value creation is a continuous process– Transform business processes into digital form

•Digital information is more efficient to create and maintain– Decentralize management but with centralized coordination– Create an e-business application architecture to address three critical

requirements:•Interface - with suppliers and customers•Integration - of business process using IST•Innovation - new advanced applications

– Integrate, but plan for continuous growth and change•Nothing is permanent

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LECTURE NOTES - CONSTRUCTING THE E-BUSINESS ARCHITECTURE

Introduction

• You must bridge the information chasm: [reference: Notes on Designing the NewDigital Enterprise under Blueprint to the Digital Economy]

• Modern business designs are built from enterprise applications - these apps are thebackbone of the e-business enterprise

• Creating large scale apps is not easy - ? too quick: may answer the wrong question• Senior management must play the role of corporate architects• Key questions senior management must ask:

– What are the key trends that will drive e-business apps?– What is the role of packaged apps software?– Role of technology changes in decisions on app deployment?– What is the ideal e-business application architecture?– What integrated architecture will radically improve corp. performance?– What management structure will harness and exploit business apps?

Why is application Integration Important

• Many reasons to force integration, among the most important:– New customer - Care Objectives

•Rapid, error free fulfillment will increasingly play a major role in retainingcustomer loyalty

•Amazon.com has integrated their Web sites with their back office systems -inventory management, order processing, financials, customer services, etc.

•How to integrate apps for seamless flow of information that e-businessdesigns demand.

– New competitive conditions require Integrated apps to Survive•Changing competitive environment is driving the need for integrated apps•Integrating internal apps is just a down payment on a competitive advantage•NB Power Case - use of SAP [reference: Why ERP]

– Fast Moving competitors force the need for app. integration•NORWEST MORTGAGE CASE•Traditional non-automated industry caught in e-business transaction•2,000,000 customers, 1 of 15 mortgages in US•Strategy - to enable customer convenience•Access to any information, in any form, anytime, anywhere•Acquisition to get flexible scaleable e-business architecture

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• Bad for your health: problems caused by lack of integration– Oxford health’s computer problem overstated revenue understated expenses -

stock fell 80%– Organizational barriers to getting integration right:

•Focusing too much on efficiency and cost-cutting too narrow a view•Not listening to customer’s perspective•Rehashing competitor’s ideas “best practice” may not be best for you•Pursuing drawn-out enterprise projects - search for perfect solution•Frequent reorganization=> weak executive involvement and success•Relying too much on outside consultants for execution

New Era of Cross-Functional Integrated Apps-Application Clusters• Stages of Evolution of Business Apps

– Stage One - Simplification and Segmentation•fragmented processes while improving productivity

– Stage Two - Reintegration and Transformation•i.e. order entry transformed into sales apps•“business process reengineering “focuses on cross-functional business

processes.•Shifts from task-oriented to process-oriented organizations=> discontinuous•Trend toward software-enabled process support

– Stage Three - Cross Functional Integration an Fluid Adaptability•Application clusters are designed to integrate an array of internal functions

(i.e. BAAN, SAP, J.D. EDWARDS, Siebel, etc.)

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New Era of Cross-Functional Integrated Apps-Application Clusters - Continued

• Charles Schwab: Customer Relationships Management Apps– Customer service is the core of Schwab’s strategy– Siebel’s Sales Enterprise system purchased=> CRM functionality– Allowed Schwab’s sales reps. to understand the customers and the company’s

relationship with them - all 3.5 million– Integrated CRM apps provide immediate value– Large, rich companies are purchasing and implementing packaged apps over

custom-built solutions

• Nestle: Enterprise Resource Planning Apps– 210,000 employees, 498 factories, operating in 69 countries– Challenge: how to integrate systems and business activities while gaining high

quality, consistent management of information– SAP’s ERP application suite purchased to run order entry, purchasing,

invoicing and inventory control.– Shift from stock-oriented to demand-driven production.

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Page 5New Era of Cross-Functional integrated Apps-Application clusters - Continued

• Ford Motor Company: Supply Chain Apps (Visteon Division)– balancing production capacity with market demand - biggest challenge– SCM application chosen to meet the challenge– In today’s customer-driven environments company’s must streamline their

inter-company processes as well as in house operations.– Result is enormous payoff for all participants in the supply chain.

• Whirlpool: Selling - Chain Management– Second largest producer of major home appliances in the world– To reduce operating costs streamline the sales process– Bought an enterprise software suite to integrate sales functions– S-C Management Apps are a cross-functional application cluster

• CIBC: Operating Resource Management Systems– ORM Systems are a new class of procurement-oriented apps– Canadian Imperial Bank of Commerce (CIBC) secured ORM– Potential savings from ORM is very high, because 95% of the procurement

process was paper-based.– PO’s Cost from 70 - 300 $ each (average $100+)– ORM’s are employee self-service apps

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New Era of Cross-Functional integrated Apps-Application clusters - Continued

• Bay Networks: Enterprise Application Integration Apps– BN built a custom interface between their Customer relationship management

app and ERP from SAP– Interface processed 10,000 new delivery records per day– This interface (EAI) - a connector app unite front office customer relations mgmt

with back office operation apps.– EAI apps are necessary with multi-vendor environments– Cross World Software is one vendor providing EAI apps.

• Business Analytic, Knowledge Management, and Decision Support Apps– Objective of these apps is to turn the enormous amount of data available into

knowledge companies can use– Need to get business intelligence from increased electronic data capture– Market for these apps is expected to grow substantially– These apps are the first time we are seeing the integration of data capture,

analysis delivery into comprehensive solutions

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Integrating App. Clusters into an E-Business Architecture

• Enterprise Business apps are fundamentally process systems– No single vendor can provide every need, hence customers purchase multiple

apps from multiple vendors ∴customers have to integrate different businesssolutions.

– Figure 4.11 shows how various application clusters are integrated to form thefuture model of the 21st century org (discuss the model)

– Companies now run on independent application clusters.

• Integrating e-business apps is a journey, not a destination– The Wal-Mart example is one of the best– creating the e-business application architecture is a continuous process of

integration, encompassing the enterprise’s entire operating base - apps,information, communications, and infrastructure - to support the business

– Creating the application architecture is a top-management job

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Figure 4.11: E-Business Application Architecture

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Integrating App. Clusters into an E-Business Architecture- Continued

• Aligning the e-business design with application integration– Evolutionary process - described over five stages– Application integration must be closely aligned with the e-business design

strategy– Toughest part is changing organizations to align with the technology.– Stage 1: Cross Functional Business Unit

•Produce dependable, consistent, quality products and services at the lowestpossible cost

•e.g.: Whirlpool, CIBC– Stage 2: The Strategic Business Unit

•Serving the customer end-to-end•Beginning to consolidate their supply chain•e.g.: American Express

– Stage 3: The Integrated Enterprise•Focus on cost-reduction and internal efficiency•Goal is to be highly customer responsive, leveraging the ability to quickly

deliver high quality products and services at the lowest total delivered cost•e.g.: Dell Computer

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Integrating App. Clusters into an E-Business Architecture- Continued

– Stage 4: The Extended Enterprise•Creating market value is most important•Multi-enterprise supply chain with a shared information infrastructure•e.g.: McKesson

– Stage 5: The Inter-Enterprise Community•Focus is on market leadership•e.g.: Microsoft Expedia and E*Trade

– Success depends on a flexible and forward - thinking business architecture– Only with relentlessly integrated systems does a firm stand a chance of keeping

up.

LECTURE NOTES - CUSTOMER RELATIONSHIP MGMT: INTEGRATINGPROCESSES TO BUILD RELATIONSHIPS

Introduction

• Facts to Know and Understand– Cost is 6 times more to sell to a new customer than an existing one– A typical dissatisfied customer will tell ten people about his experience– Company can ↑ profits 85% by ↑ customer retention 5%– Odds of selling to a new customer are 15%, to an existing customer 50%– 70% of complaining customers will continue to be customers if problem is quickly

resolved– ↑ 90% of companies now don’t have the necessary sales and service integration to

support e-commerce

• Why Customer Relationship Management?– Customers want excellent service - now!– Effective management of customer relationships is a source of competitive

differentiation– CRM is one of the highest growth software markets– To keep your best customers - create new delivery channels, capture large amounts of

customers data, and tie it together to provide customers with a unique experience

• Defining Customer Relationship Management– An integrated sales, marketing and service strategy– Goals of business framework:

•use existing relationships to grow revenue•use integrated information for excellent service•introduce more repeatable sales processes and procedures•create new value and instill loyalty•implement a more proactive solution strategy

– CRM applications ⇒better customer relation programs ⇒ maximizing thelifetime revenues

– New technologies and ↑ demands on customer service– CRM software $153 billion in 1998, growing at 30% per year– Managing Customer Life Cycle : 3 phases of CRM

•acquiring new customers•enhancing the profitability of existing customers•retaining profitable customers for life•master one of the 3, it will dictate the technology infrastructure strategy

– Acquiring new relationships•instantaneous response to customers is key•probability of a sale ↑ with response in 1 to 3 minutes

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– Enhancing Existing Relationships•“Best Buy” case: call center’s primary concern is customer satisfaction

through effective resolution of issues and concerns– Retaining Customer Relationship

•requires knowing and understanding your customers’ needs•“State Farm” Case : pricing policy, commission policy for agents ⇒

“close to the customer” objective

• Organizing Around the Customer: The New CRM architecture– Take the test - answer the questions, pp. 116 and 117– What’s new about CRM architecture?

•customer -centered nature of applications, not centered on marketing, salesor other internal functions

•measuring customer feedback drives CRM improvements•CRM infrastructure is really a portfolio of process competencies

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– Portfolio of CRM Process Competencies•core are: cross-selling, up-selling, direct marketing and fulfillment,

customer service and support, store front and field service, and retentionmanagement

•cross-selling and up-selling software include the capability to qualifyprospects, track contacts and refer them to sales people when appropriate --- companies must sell complementary products and services to deepentheir relationships with customers

•direct marketing and fulfillment - sell well and deliver fast. Goal offulfillment is to provide a myriad of information to customers quickly,easily and efficiently

•customer service and support - collection of discrete applications (servicerequest mgmt., account mgmt., contact and activity mgmt.,customersurveys, return material authorization, and service agreements) which mustwork together to ensure that customer service representative can quicklyassign, create and manage service requests

•field service operations - the hands-on extension of external customersupport, i.e. service calls

•retention management - spend your resources on customers who count.Differentiate customers based on account and transaction history - dependson decision support technology - depends on gathering detailed customerinformation

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• Supporting Requirements of the Next Generation CRM Infrastructure -- requires fivetypes of integration: 1) customer content, 2) customer contact information, 3) end-to-end business processes, 4) extended enterprise or partners, and 5) front-office andback office systems

– Integration of Customer Content•holistic view requires integration of structured and unstructured data•integrated picture of customer allows for numerous service and sales

opportunities– Integration of Customer Contact Information

•opportunities for customer interaction ↑ and diverse•Capturing and sharing interactions within organization is top priority•channel - independent solutions are required

– Integration of End-To-End Business processes•restructure to be solution-oriented not problem-oriented•the keys are consistency and simplicity•web provides organizations the opportunity to achieve end-to-end

integrated sales and service environments– Integration of the Extended enterprise: Interenterprise Customer Case

•sharing customer information with partners and third-party serviceorganizations is absolutely critical

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– Integration of Systems -- CRM requires integration of the telephony, web, anddatabase technologies to provide a total view of customer attributes and accounthistory. The enabling technologies that must work together are:

•legacy systems - requires middle-ware and messaging tools•computer telephony integration (CTI)•data warehousing - move from data to information•decision support technology - use of analytical and modeling tools

• Organizational Challenges in Implementing CRM– implementing CRM requires a high degree of political, cultural and

organizational change ∴resistance⇑– CRM implementation organizational issues:

•CRM can reduce an individual business unit’s contribution whileincreasing whole company benefits -- requires new look at financialincentives

•CRM requires migration from “silo-centric” to customer centricInfrastructure - proprietary issues

•global organizations must deal with different languages, time zones,currencies, regulatory environments, etc.

– Front line must carry the “customer’s voice” deep into the organization and use itto guide processes.

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• Next Generation CRM Trends - management needs to reevaluate customer contactpoints– The rise of the call center as a powerful customer contact point

•one of the main growth areas in customer contact•70% of all customer contact occurs at call center•Internet will soon replace telephone•must eliminate lengthy hold times and call transfers•managers need to plan the transaction from call centers’ high-touch

capability to the web’s low-touch capability– Listening to the Customers

•be careful whose customers you listen to•feedback from competitors customers- very important

– Customer Loyalty: Luke Warm or Fanatical•answer the question - what have you done for me lately•do your customers get polite customers service? Or are they delegated

when the call is over•Harley - Davidson Case

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–New Integrated Service Experience•telephone support the web contacts

–Higher Service Expectations•customers dissatisfaction with service is widespread•customers expectations are rising ⇑ better service•companies must view the world through the customer’s eyes to build

great customer relationships–New Competition Creates New Headaches

•companies must create value for the customer. This is the key tosurvival in an increasingly dynamic market

•new and nontraditional competitions are entering established markets,with lower cost structure and broader geographical reach and they arecreative in addressing customer needs

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• Building a CRM Infrastructure: A Manager’s Roadmap– define a vision of integrated CRM - whole picture– understand the customer– develop a business case (use technology)– evaluate current readiness (competition)– establish the CRM strategy and specific objective– evaluate appropriate application - focus on case of doing business– take the customer’s view not the product or account view– identify and target quick wins and then celebrate successes– put the ownership of the end-to-end projects in the hands of a single manager– implement in stages - be proactive about change– be sure to create a closed-loop CRM environment– create concrete measurement goals

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• The goals of the new CRM Infrastructure– create a single, long-running customer dialogue across all business functions and

customer access points– create an integrated approach across all functional units that enables company-

wide management of customer relationships– ensure that all channels your customers use are easy and consistent– understand customer behavior– understand when to take action

LECTURE NOTES - SELLING-CHAIN MANAGEMENT: TRANSFORMINGSALES INTO INTERACTIVE ORDER ACQUISITION

IntroductionProblems with Existing Sales Processes

– marketing information is not consistent - what’s right ?– Sales people are inundated with non-value added tasks– fragmented order support is a problem after the order is placed– current sales apps. are not responsive or flexible because IS staff is backed up with

change requests– current systems are not integrated - requires keying data

• Defining Selling-Chain Management– an integrated order acquisition strategy– from inquiry to order - the whole life-cycle– SCApp are tools to streamline the integrated set of activities to acquire and fulfill

orders.– SCApp Framework Goals

•basic change is moving from fractionally oriented sales automation toprocess oriented selling-chain management

•make it easier for the customer•add value for the customer

•make it easy to order customer products•increase sales force effectiveness•coordinate team selling

– Why an Integrated Selling Infrastructure•increasingly sophisticated and demanding customer•sales organizations must add value, operate faster, be more accurate, and cut

costs -- all at the same time•the order acquisition process has undergone little change and automation in

most enterprises, to date

• Business Forces Driving the Need for Selling-Chain Management– The Rise of the Self-Service Order

•after search customer looks for final selection process that is comfortable,convenient and least irritating

•example of success: Microsoft Car Point, Auto-by-Tel, etc.•“selling” is done not by sales people but by customers themselves

– The Excessive Cost of Presales Technical Support•delays in preparing quotes and proposals lead to lost sales•technical support is effective but drives the cost of selling up and shifts the

burden of expertise from sales person to technical sales specialist•trend toward “market of one” makes use of standardized proposals difficult

and complex

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– The Increasing Cost of Order Errors•more customization ⇒ more order errors•human error often accounts for order mistakes

– The Increasing Channel Proliferation Problem•channel applications that serve order acquisition side are:

field sales and in-store/branch sales - assisted in-person sellingtelesales - assisted call-center sellingself-service - unassisted selling via the Webthird party resellers or channel selling

– The Increasing Complexity of Products•force companies to pressure sales force to improve productivity and

responsiveness•tight labor markets for seasoned sales professionals

– The Rise of Deregulation, Mergers and Acquisitions•monopoly enterprises have to shift orientation•not paying enough attention to customer needs during mergers is often the

primary cause of company failure

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• Technology Forces Driving the Need for Selling-Chain Management– Reasons Why SCApps Get Mixed Reviews

•integration was not a factor considered in the selection and implementationof applications

•many of the then-current software solution were unwieldy or difficult toimplement

•the breadth of product functionality did not meet the real businessrequirements

•sales and marketing staff refused to use the products because they didn’tincrease sales effectiveness

– The Selling-Chain Application Continuum (ref. Figure 6.2)•requires a more customer-centric sales functionality today

– Problems with Existing Sales Force Automation•first generation of SFA software introduced stand-alone, task-oriented

tools ---- focused on direct sales force•second generation SFA software focused on improving the administrative

productivity of salespersons•second generation SFA tool problems limited task-oriented functionality functional isolation organizational resistance limited view of customers

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– Limited Process Functionality•SCAs must automate processes across multiple user types and functional

areas -- this means a significant degree of complexity in SCApps.– Limited Sales Effectiveness: The Need for More Integrated Applications

•sales people can only be as effective as the systems in which they work•to facilitate effective selling, focus is placed on ease of use, which also

relates to staff retention and training

• Managing the Order Acquisition Process– process of order acquisition entails performing needs assessment, facilitating

option selection, performing configuration, generating quote, proposal, etc.– map the customer’s entire experience with the sales order process– corporations, worldwide use turning to OA systems to gain and use more

intimate knowledge about their customers in the order acquisition process

• “Cisco System” and Selling-Chain Management– Began in 1966 Cisco began the process– Phased plan on how to establish leadership in e-business

•phase one - Info. Center - one way information•phase two - Marketplace and Internetworking product Center•phase three - (currently in process) Customer Fulfillment•phase four - (planned) Relationship Mgmt -e-business strategy

Page 6– Inter-enterprise Order Acquisition: Cisco Connection Online

•to serve business-to-business commerce - start 6/96•Web sales at $6 billion in late 1998•with electronic order entry Cisco reduced lead time by 3 days and better,

personalized service and support– Elements of Selling-Chain Infrastructure

•first, isolated apps. developed for key aspects of OA process•Product Catalogs and marketing Encyclopedia: for assisted selling --

marketing encyclopedia and intelligent electronic catalog connects salesrepresentative and customer to most current product and serviceinformation

•Sales Configuration Systems: identifying mis-configured orders early iscritical to reducing rework costs and customer returns

•Pricing Maintenance, Distribution and Configuration: selling complexproducts requires effective pricing strategy support

•Proposal and Quote Generation: such as -- opportunity creation/tracking,interactive needs assessment, automatic quote generation, proposal wizard

•Sales Incentives and Commission Processing: potential levers forincreasing sales effectiveness because the realm of compensation design,planning and processing is one of the most complex, error-prone, and timeconsuming areas for today’s executive

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• The Customer Foot: Transforming, Shoe Sales with Technology: “Custom Foot”Case– attempted to completely reengineer the sales process using technology– customers could have shoes made to their specifications in about 3 weeks,

starting at $100.00– how did it work

•customer stands on infrared scanner to measure feet size•customer sits at kiosk to select options - shoes are dynamically depicted as

the specifies options•order sent to factory•3 weeks later shoes arrived at customer location

– 6/1/1998 Custom Foot filed bankruptcy– The Problems:

•conflict between “size” and “fit”•misjudging the importance of subjectivity in shoe fitting - loose, tight,

what’s right•forecasting demand for various leather was very difficult

– the flow of precise order information from customers to company dealing withcustomized production services is critical to success

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•Biggest Challenge for Managers Who Want to Implement Selling-Chain Apps.are:

– How to keep up with all the changes in vendors, applications, technologies,pricing and tools

– How to sort through vendors and software to select the best fit– How to ensure a successful implementation and development

LECTURE NOTES - ENTERPRISE RESOURCE PLANNING:THE E-BUSINESS BACKBONE

Introduction– 70% of Fortune 1000 Companies have begun work on ERP– Lending vendors: SAP, ORACLE, PEOPLESOFT, J.D. EDWARDS, and BAAN– Top management now realize that outmoded systems must be fixed - fast– ERP is the backbone of e-business– Who really uses ERP suites?

•3Com Corporation•Chevron Products Company•General Motors

– Effective Service Delivery Requires Integrated Back-Office Applications•Ericsson Case

sales order processing lead time from 1 hour to 10 minutespurchase order lead time from 2½ hours to 5 minutesproduction scheduling run time from 18 hours to 30 minutesto 98% on time order delivery

• Why is Management Willingly paying Millions for ERP Suites?– The need to create a framework to improve customer order processing– The need to consolidate and unify business functions– The need to integrate a broad range of disparate technologies– The need to create a new foundation for next-generation apps– Y2K issues boosted ERP adoption– The Second Wave: e-commerce drives ERP demand

•the following drivers vary with intensity across different industries, but theircombined impact is causing managers to reevaluate application capabilities:replacing creaky legacy systemsgaining greater controlmanaging global operationshandling industry deregulation and regularity changeimproving integration of decisions across the enterprise

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• ERP Decision = Enterprise Architecture Planning– Ask the right question: What kind of company do we want to be? Not What

features are in each application– Fox Meyer Drugs Case

•ERP implementitius ⇒ bankruptcy– IT Dept. runs the show ⇒less than optimal results– ERP impact not just software– ERP adoption significantly affects organizational architecture, processes,

people and procedures– ask the right questions: What is our business?, What are our issues today?,

What will be important tomorrow?– ERP Decision: Build or Buy Software

•favors purchasing “commercial of the shelf” COTS software from thirdparty vendors

•COTS solution ⇒ initial ↑ total costs•Highest costs from: consulting and programming resources associated with

implementation and maintenance– The Capabilities of COTS ERP Solutions

•consolidation of the back office•creation of a single back office that supports multiple channels•facilitation of changes in business practices•facilitation of changes in technology

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• The COTS ERP That Keeps on Ticking: The SAP Juggernaut– after Microsoft, SAP is second-largest software developer in terms of market

capitalization– founded in 1972 by five ex-IBMers– R3 product launch in 1992 ⇒ expediential growth

•multilingual/multinational design ⇒ global acceptance•Top software vendor in Germany

– SAP has strong lead in market– a $50 - 60 billion consulting ecosystem grew around the product– R3 is a technical tour de force– change one module ⇒ all modules changed– looks like SAP/R3 will continue to dominate

• ERP usage in the Real World– Microsoft -- “an incredible success story”

•spent $25 million and ten months installing SAP/R3 to replace 33 financialsystems in 26 subsidiaries in 1995

•failed to implement ERP solution in 1992 & 1993•required close coordination and extensive preparation

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Page 5– Owens - Corning

•goals of new sales order management system:accepting orders from any locationworldwide into one systemassigning ship dates to available productsscheduling future ship dates to products (not in stock)checking order statures 7/24

•integrating these islands of information ⇒ est. savings of $65 million byend of 1998

– Colgate-Palmolive: The ERP benefits are Tangible•70% of total revenue from foreign sales•goal to achieve the ability to coordinate globally and act locally•installed SAP in US division by end 1996•now installed in 35% of all operations•all divisions to be installed by 2001•benefits include:

from 75 data centers to 2 (w/40 people) -order acquisition and processing from 6 days to 4 hourson-time delivery from 91.5% to 97.5%domestic inventories ↓ by 1/3function consolidation ↑ 8 : 1 & 3 : 1

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• ERP Implementation: Catching the Bull by the Horns– Each ERP application suite is different

•never approach the installation of ERP packages in the same manner•variety of application implementation strategies (discuss)•how to do it wrong: Brother Industries Ltd.

– Roadmap to Rapid Implementations: The accelerated ERP approach•automation without simplification only immortalizes ineffective processes•SAP’s ASAP methodology (works) phases:

project preparationblueprintpilotfinalassessment

•ASAP ↓ risks, ↑ consistency ⇒ quick results•implementation is just the beginning

– Roadmap to New Leadership Skills: effective coordination managementencompasses a combination of capabilities:

•strategic thinking - how well does your ERP selection, implementation andevolution strategy align with your business strategy

•process reengineering - you can NOT implement large-scale systems withoutfirst changing processes

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•managing implementation complexity - requires partnership governing --tie compensation to deliverables

•transition management - overcoming resistance to change -- vendors andconsultants can’t do it all

• The Future of ERP Applications- The critical elements required to achieve flexibility

•Components, not modules - need apps, that can be pulled apart,recombined and distributed to match new out-sourced business models

•Incremental migration, rather than excessive reengineering - cutimplementation time

•dynamic, rather than static, configuration of ERP systems -- achieve theability to create dynamic suites of apps out of the best-of-breedcomponents

•management of multiple strategic sourcing and partnership relationships -must monitor and model processes affecting the activity of the business

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–Next Generation: ERP is Evolving into Supply Chain Planning (SCP)• similar to MRP ⇒ MRP II ~ ERP• ERP asks Can I Take your order? SCP asks Should I Take your order?• SCP systems have emerged as a component to ERP systems to

provide intelligent decision - support capabilities• supply chain execution and selling chain management must back up

SCP–ERP Application Management and Maintenance is Big Business

• must have tools and methodologies that aid implementation andconfiguration of apps to meet performance specifications required

• requires a variety of management tools -- the primary categories are: service management i.e. Lumanate, Envive use management, i.e. IBM’s Maestro systems administration, i.e. IBM’s Tivoli, CA’s Unicenter and HP’s Open View• Effective App Management means making sure response time,

uptime, and transaction volume are as fine-tuned as possible.

LECTURE NOTES - SUPPLY CHAIN MANAGEMENT: INTER-ENTERPRISE FUSION

Introduction

– SCM isn’t a technology issue it’s a business strategy issue that creates new,interesting opportunities

– Recent development at some corporations illustrate the impact of internet - enabledSCM on modern business

•Bargen Brunswig - managing information•Dell Computer - frictionless information flow•Proctor & Gamble - manufacturers and suppliers linked•Bowing Aircraft - problems with production•Nabisco - SCM not integrated

– SCM responds to delivering what the customer wants, when and where it’s wanted,at the lowest possible cost

– The next opportunity lies in fusing each companies internal systems to those of itssuppliers, partners and customers

– SCM now on the minds of senior management

• Defining Supply Chain Management (SCM)– the “process umbrella” under which products are created and delivered to

customers– the coordination of material, information, and financial flows between and among

all participating enterprises– new generation of SCMs optimize cost, service, quality and time factors ⇒

customer satisfaction– an e-supply chain in action: Warner - Lambert & CVS

•the Listerine product story•“scan one” - “make one” objective

– Supply Chain Investment Trends•worldwide dispersion of manufacturing and distribution facilities•channel unpredictability is the norm•responsiveness over efficiency•companies accept lower margins to maintain and increase market share

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• Basics of Internet-Enabled SCM: e-Supply Chain 101– SCM Requires Inter-enterprise Integration

•requires compromises for overall optimization•manufacturers maximize profits by longer production lead times, but•retail stores and distributors maximize profits by inventory turns

– Types of Inter-Enterprise Integration•Responsive SC - available-to-promise (ATM) factor•Enterprising SC - rapid reconfiguration of SC•Intelligent SC - restructuring the SC to strengthen weak links

– Inferior Integration affects corporate performance - symptoms include:•erratic levels of customer service•no vision of future demand•too many changeovers in production•too many stock outs

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• Basics of Internet-Enabled SCM: e-Supply Chain 201– SCM is a business framework composed of multiple application in two camps:

•planning process - focuses on demand forecasting, inventory simulation,distribution, transportation, and manufacturing planning and scheduling

•execution processing - addresses procurement, manufacturing anddistribution of products throughout the value chain

– Elements of SC Planning: Categories of SCP modules:•order commitment - available-to-promise systems•advanced scheduling and manufacturing planning•demand planning•distribution planning•transportation planning

– Elements of SC Execution:•order planning - bridges the gap between planning and execution, includes

fulfillment planning•production - includes timing of final assembly•replenishment - to minimize inventories•revenue distribution or revenue logistics - to minimize customer returns

and obsolescence

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• E-Supply Chain Fusion: E-Supply chain 301 -- creating an integrated SC structure &integrate from existing SC models to more effective integrated models– Diagnosing Root Causes of SC Problems - requires identifying and untangling

underlying troubles, such as:•luck of knowledge about end-to-end demand planning function•inconsistent or out-of-date data, due to a lack of integration with ERP•a lack of process integration across partners•lack of necessary structural changes - eliminate the host-centric systems

– E-Supply Chain Heal Thyself: Fixing the Root Cause - Supply Chain fusion goesthrough four stages:

•enable information sharing - a solid communication process•create joint performance measurement systems and collaborative planning

processes•exchange responsibilities and realign work•redesign products and processes so that work becomes easier and more

effecient

• E-Supply Chain Fusion Management Issue - The Four Fundamental Questions:– What is the Right SC Structure for my Company?

•consider the nature of demand for your products: functional products require efficient processes, innovative products require responsive processes•the objective of any SC design is to please the customer and make money

– Does the SC Enable Effective Differentiation Capabilities?•Companies have the opportunity to differentiate themselves through theirsupply chains•most companies have multiple supply chains•differentiated policies = matching of performance standards to the cost and cycletime of different products

– Does my SC Facilitate Effective Order Fulfillment Capabilities?•order fulfillment is the highest single cost of doing business and therefore offersthe greatest opportunity to reduce costs and improve service

– Does My Company have the Right Infrastructure Capabilities?•Creating a real-time SCM infrastructure is a difficult and ongoing issue - not easy!•SCM apps constantly and rapidly evolving changing the realm of what is possible•SCM app market expected to explode in the coming decade

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• The Future: e-Supply Chain in 200X– Integrated Make to Stock - traditional– Continuous Replenishment - ECR & QR– Build to Order - to attain maximum flexibility– Integrated Make to Stock: STARBUCKS

•integrated supply and demand ⇒ end-to-end integration•60% sales growth for eight consecutive years•4 million customers each week•SC supports three channels: specialty, direct response and retail or joint

ventures•SCM objective is asset profitability

– Continuous Replenishment:The CVS Pharmacy - Mc Kesson Demand Chain•CVS is leading drug retail chain•Mc Kesson is leading U. S. distributor of pharmaceuticals, health care

products and medical/surgical supplies w/1,6 million orderlines per day•Mc Kesson heavy EDI user - 80% of goods purchased•Mc Kesson’s wholesale drug distribution network is the most cost

effective means for pharmaceutical manufactures to go to market•CVS/Mc Kesson ⇒ cooperate closely, share CS info in an integrated

environment ⇒ cost effective high customer satisfaction

–Build to Order: Intel, Solution and Ingram Micro•Ingram Micro and Solution combined the is core strength: logistics and ordermanagement and efficient high-volume manufacturing ⇒ build-to-orderassembly services for PCs, servers and peripherals•match supply with demand in real time•from order placement to product with customer in seven days•the enemy of efficient SC is excess inventory•Ingram - Solution reseller inter-enterprise SC improves management andcustomer service

• Supply Chain Management: A Manager’s Roadmap -- The Eight Steps critical to turningtomorrow’s promise into today’s realty:

–Clarify your supply chain goals–Conduct a SC readiness audit ⇒ a company - specific roadmap for SC development–Develop a business case–Establish a supply chain coordination unit - hard hitting but thinly staffed–Begin supplier integration -- partners are needed to support the new virtualorganization–Develop performance scorecard–Educate, Educate, Educate - employees, vendors and other SC members–Learn to manage failure -- management must become adapt at identifying brush firesbefore they become full-fledged or

•you’re in trouble if you’re behind schedule, over budget, or everyone ispointing fingers

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•SUMMARY

– Supply Chain excellence requires effective strategies, sustained management commitment and changes in attitude, culture and organization

– Trends in technology, globalization of the economy, acceleration of outsourcing, standardization of enterprise apps, and the success of companies adopting SCM cause major changes to occur in the underlying structure of traditional technology supply chains

• sales are becoming customer driven

• consolidation in acceleration within each segment of the technology supplychain ⇒ ↓ number of suppliers with which to partner on

• Companies are broadening the range of services they offer, perhaps withsimilar services offered at different points in the SC

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LECTURE NOTES: E-PROCUREMENT: THE NEXT WAVE OF COSTREDUCTION

• INTRODUCTION– LARGE Companies spend 5 - 10% of revenue on non-production goods - a $500

billion a year market– Procurement inefficiencies are very high

•non-productive goods account for over 1/3 of corporate expenditures•95% of non-productive goods are acquired using paper-based processes

• STRUCTURAL TRANSITION: From Isolated Purchasing to Real Time ProcessIntegration– Corporate purchasing is undergoing a structural transition– You say “Purchasing” and I say “Procurement”

•purchasing refers to actual buying of materials•procurement is broader -- it includes purchasing, transportation, wear-

housing and inbound receiving•procurement is migrating from traditional paper-based processes to e-

procurement– Managers need a detailed understanding of how the next generation of e-

procurement apps are being developed

• WHY IS PROCUREMENT A TOP-MANAGEMENT ISSUE?– Procurement is evolving from a support function to a weapon in a corporation’s

competitive arsenal– Goal of automation is to free professional buyers to focus their attention on more

strategic issues– Five biggest challenges faced by CPO’s today are:

•reducing order processing costs and cycle times•providing enterprise-wide access to corporate procurement capabilities•empowering desktop requisitioning through self-service•achieving integration with key back office systems•elevating procurement to a position of strategic importance within the

organization– Operational cost management is a central objective of e-procurement

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• WHY EXACTLY IS OPERATING RESOURCE PROCUREMENT?– There are two types of corporate procurement

•production related goods - raw materials, components, etc.•non-production related goods - office and computer supplies, etc.

– Types of Non-production or Operating Resource Products•procurement of nonproductive goods is called Operating Resource

Management (ORM)•basic types of operating resources:

general and administrativecorporate-related capital equipmentmaintenance, repairs and operations (MRO)travel services and entertainment

•highly fragmented market: 50 largest distributors have 15% market share– Operating Resource Procurement Process: Controlled Chaos

•operating resource procurement’s bad practices include: inefficient buying,redundant processes, non-strategic sourcing and maverick buying

•cost of purchase in a paper-based system is $70 - $300 per day– How Big is the Operating Resource Market?

•America’s top 2000 corporation spend $400 billion on nonproductivegoods each year

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• OPERATING RESOURCE PROCUREMENT AT MICROSOFT– Summer 1996 implemented a new tool - “MS MARKET”: an online ordering

system working on Microsoft’s intranet– In its first year of operation MS Market was used to purchase $1 billion in

supplies by 6000 employees– MS Market cost Microsoft $1.1 million– MS Market used primarily (70%) for high-volume, low value transactions– Ms Market’s use has grown steadily - today it exceeds $3 billion annually

• PROCUREMENT BUSINESS PROBLEM: Lack of Process Integration– Need for an integrated solution - e-procurement chain management is evident– Big challenge is structured migration– A successful system must be designed for causal use by untrained employees– Guidelines for evaluating integration alternatives

•management control by purchasing managers•online product selection - online catalogues•electronic ordering - seamless transition from requisition to purchase order•application integration w/ existing systems•information and reporting - for supplier negotiation and reconciliation

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• Next Generation Integrated Procurement Applications– Three basic categories of e-procurement apps:

•buy-side desktop requisitioning•buy-side centralized procurement•sell-side applications

– See table 9.5 for comparisons

• Elements of Buy-Side e-Procurement Solutions– a buy-side app is seamless and integrated the entire procurement process and resides

on an intranet– a good buy-side application:

•automates selection and purchase of goods from the desktop•cuts the administrative overhead•integrates the sourcing, ordering and payment processes•electronically sends and receives the full range of requisition documents

from buyers•accurately and quickly reports on purchasing activities•controls the number of preferred customers

–The buy-side Requisitioning Process•secure personal log-in•Gauze authorized supplier catalogs•real-time requisition / order creation•requisition / order submission•purchase controls / rules•workflow and approval routing•order dispatch and fulfillment•order status tracking

–Ariba Technologies: Spotting a Buy-Side Opportunity•first to market an operating resource management system (ORMS)•not cheap - ariba’s ORMS costs millions•ORMS focuses on customer’s needs•ORMS being challenged by ERPs like SAP

–Buy-Side Requisitioning Integration Issues•employee connectivity w/ powerful interface•back-end systems connectivity w/ ERP•supplier connectivity - streamline and automate

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Page 7• Buy-Side Applications for the Procurement Professional– The key to successfully achieving procurement effectiveness is the application of

spending analysis and planning across the entire spectrum of procurement– Spending Analysis and Planning Functions:

•data collection•multidimensional analysis (OLAP)•supplier management decisions•configuration of spending controls•continuous feedback to refine controls

• Elements of Sell-Side e-Procurement Solutions– Moving beyond business-to-supplier model toward trading communication -

vertical portals / hubs for communication in specific markets– Three factors must be addressed to ensure success with this new model:

•supplies integration into extranet•supplier content - rigorously maintained•customer internal rollout - scaleable

– Maintenance wear-house, a Home Depot subsidiary•supplies for repair and replacement products for multi-housing, lodging

and commercial properties– Vertical Procurement Portals (info mediaries or hubs)

•a sell-side destination site•i.e.: Chemdex.com & SciQuest.com•vertical procurement portals are a growing and important trend

•The e-Procurement Manager’s Roadmap–CPOs are looking to deliver maximum business inspect at the lowest possible cost–CPO’s business objectives:

•leverage enterprise-wide buying power•quick results, low risk•supplier rationalization•cost reduction by automating best practices in strategic procurement

•Systematic Roadmap to e-Procurement–Step1: Clarify Your e-Procurement Chain Goals

Set Specific Goals, Typical Goals are:•automating the selection and purchase of goods•cutting costs significantly throughout the organization•quickly and accurately reporting company-wide purchasing patterns•eliminating purchasing by unauthorized employees

–Step2: Construct a Procurement Process Audit•it’s important to understand the current procurement process and the globalfactors that affect, impede, and interact with it•a procurement chain audit will ensure an accurate big-picture model•allows dealing with key areas that must be studied, i.e.:

are current processes consistent with the organization’s strategic goals andobjectivesdo the procurement chain processes meet customers’ needsdo the current procurement chain processes promote efficiency

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–Step 3: Create a Business Case for e-Procurement•ROA = (Revenue - Expenses) / Assets•implementing an e-procurement solution should yield a 5% savings in separatingresource costs•saving should exist within and beyond the organization

–Step 4: Develop a Supplier Integration Matrix (SIM)•a SIM helps determine the best type relationship to have with individual vendors•a SIM allows clarifying supplier in 4 categories:

1. strategic-collaborative (unique products)2. strategic-cooperative (strategic products)3. non-strategic-limited (limited in supply products)4.non-strategic-commodity (plentiful products)

–Step5: Select an e-Procurement Application - Key Considerations:•Will it support my procurement process?•Does it leverage my other application investments?•Will it work seamlessly with other applications?•Is it extendable / scaleable?

–Step 6: Integration is Everything•DO NOT take an exclusive buy-side or sell-side viewpoint

–Step7: Educate, Educate, Educate•Large amounts of staff time, mental energy, and dollars are devoted to workingthe software, and relatively little time is devoted to people ⇒ frustration, sub parresults, and large expenditures with little paycheck• Senior management must listen, communicate, sell and fire to make it happen

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•CONCLUSION–To improve procurement companies must:

•focusing purchasing on strategic, value-added upstream portions of thebusiness rather than transactional downstream activities•increasing purchasing role in companies total spending, including suchnontraditional areas as operating resource procurement•centralizing procurement activities to concentrate the total spending andimprove negotiating power

–The savings gained from procurement automation drop directly to the bottom lineto deliver a substantial boast in profitability

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LECTURE NOTES - Knowledge - Tone Applications:The Next Generation of Decision Support Systems

• INTRODUCTION– Focus is on personalized decision support, modeling, information retrieval, data

warehousing, what-if scenarios and reporting– “About the business” applications– Switch from the query-and-respond paradigm to the knowledge - tone paradigm

• Knowledge Apps: Why they are Important– They free-up the data assets making them available to large audiences– They must be able to collect, organize, access and analyze large amounts of data -

fast– Flatter organizations with few middle managers ⇒

•employees must spend less time compiling data and more time analyzing it.•Employees expect high quality info., 7/24 access, and very fast performance.

– Management expects a ROI on data warehouses and other technology investments– The Web browser is the de facto interface for knowledge apps.

• Knowledge Tone is an Application Framework– Knowledge tone is not a product or a capability, it’s a framework of a fully

evolved knowledge economy– Knowledge tone is the business of information sorting, extraction, packaging, and

dissemination– The Rise of Knowledge Tone: Anytime, Anywhere & Any place DSS

•In a variety of areas: retail, banking and finance, telecommunications andhealthcare

– The Second Wave: e-Commerce - Driven Decision Support•Uses e-commerce technology to open the world of data warehousing to

consumer devices.

• Emerging Classes of Knowledge - Tone Applications– Customer Relationship Management DSS

•tools for mining customer data•outcomes: improved pricing, greater market share, longer customer retention

or new revenue streams•BC Telecom Case: implemented a customer optimization services•personalization - the trend of e-commerce to push more real-time

relationship management

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•Personalization apps allow the following° give each customer a personalized Web page° display only the info. You want this customer to see° automatically and positively notify customers of product

improvements, promotions, etc.° tailor info. According to each customer’s individual preferences° deliver info based on products the customer owns

– Supply Chain DSS•encourage training partners to improve profits by managing inventories in

the supply chain•business objective: to give one another preferential treatment in exchange

for detailed ordering and inventory info. That provides greater certaintyand visibility up and down the supply chain.

•Lexmark Case: RMS app– Remote Performance Monitoring

•performance monitoring is the process that bridges operations and strategy•an effective monitoring system is the best way to translate strategy into

action•BT Case: using SAP’s Strategic Enterprise Management apps. (SEM)

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– Business Simulation: Interactive What-If Scenario Analysis•what-if analysis provides managers with timely information for decision

making•what-if apps encompasses advanced simulation and scenario modeling

– Innovation or Knowledge Management•Intraspect Case - “Group Memory”•Intraspect ⇒ ROI by improving organization learning•highly hyped KM caused backlash, because:

°few can define it°software vendors are distancing themselves from it°costly KM efforts are not delivering expected ROI

• Knowledge Tone Usage in the Real World– K-T in telecommunications: contributing customer churn

•Churn factor: corporate promotions ⇒ customer switching ⇒ newpromotions ⇒ more customer switching

•360 Communications Case - uses data warehousing to analyze customerand consumer behavior

•costs $500 for wireless and $300 for wireline carrier to acquire a newcustomer, but $50/year to retain a customer

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Page 5– K-T in Retail: Sears SPRS Application

•Sears is the largest department store & 3rd largest retailer•facing new competition executives decided on a single data source for

performance indicators.•Strategic Performance Reporting System (SPRS)•today managers using SPRS monitor the precise impact of advertising,

weather, etc. on sales•enables a customized local perspective

– K-T in Health Care: Employee Benefit Management•HR Departments moving toward self-service, K-T apps.•Lots of choices + poor employee information ⇒ poor employee decisions

on health care options•$200 billion per year spent on administrative expense•solution - integrate disparate parties into a seamless network - over the

Web•with self-service architecture employees can perform

°managed care functions°historical tracking°eligibility checks, referrals, authorization, etc.°claims submission, info. access, reporting, etc.

Page 6• Teck Trends Driving K-T Framework Investments

– Increased electronic capture of transactional data– New publish and subscribe models - a brokered approach to program to program

communication– Improved RDBMS software– Improved price and performance of computing and storage hardware– Improved infrastructure of the Web– Final analysis is whether the cost of implementation of Web-based apps can be offset

by the benefits

• Elements of the K-T Architectural Framework– K-T architecture is based on a three layer platform:

•e-business decision support solutions•enabling technologies - data mining, query processing, and result distribution

infrastructure•core technologies - data warehouses and data marts

• Core Technologies - Data Warehousing– Business Rationale

•goal is to simplify integration issues by having a one-stop source forenterprise data

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• objective of data warehouse is to help users identify trends, find answers tobusiness questions, and derive meaning from historical and operational data

– How it works• takes production data scrubs it up, organizes it, and places it appropriately

for browsing, analyzing and decision making– Data Warehouse Components

• transactional apps ⇒ storable source data• data extraction and transformation tools• data scrubbing tools• data migration tools• data repository tools to maintain metadata• data access tools

• Enabling Technologies: Online Analytical Processing– OLAP solutions provide a means to analyze complex data along an intuitive set

of business rules– OLAP solutions provide complex computational capabilities - time series

analysis, drill-down interactive analysis, etc.– Defining the OLAP Technology

• evolving to desktop, relational, multi-dimensional and hybrid OLAPS

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• A Roadmap to K-T Framework– 1. Identify the goals of the knowledge - tone project– 2. Determine where knowledge resides in the company– 3. Determine what information the company needs to capture - learn

what you need to know– 4. Collect, Clean and Prepare Data - may require as much as 70% of the

total effort.– 5. Balance inward and outward data -- internal via, external origins– 6. Develop new approaches to categorizing information -- help coming

new startups– 7. Learn how to mine data– 8. Validate the model using an independent data set– 9. Deploy the model - use it!– 10. Monitor the model - change with changes in the environment– 11. Measure the ROI of the knowledge tone - quantification will be

difficult– Remember, the knowledge discovery process is interactive.

• Conclusion– Interconnections are facilitating the rollout of knowledge-tone application in

3 phases• Phase I: Corporate Intranets• Phase II: Extranets• Phase III: commercial Internet applications

– Today must corporate strategies in Phase I

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LECTURE NOTES - Developing the E-Business Design

• OfficeMax Case– High volume, deep discount office products superstore– 780 stores, 8000 office products, operating in 330 markets– CopyMax & FurnitureMax - store within a store concept– OfficeMax online launched in 1995 - 1st of kind online with call centers and next

day delivery from 17 centers

• The Challenges of E-Business Strategy Creation– Based on future assumptions about everything - customers, technology,

competition, core competencies, etc.– Either top down or bottom up (tends to be short term)– Top down analytic planning

•data rich, numbers driven and analytically based•biggest problem is separation of strategy formulation (analysis) and

implementation (execution)•problems that occur (too frequently)

ºthe never-seen-again strategic planºthe no-goals strategic planºthe no-feedback strategic plan (must be dynamic)

– Bottom-up, “just do it” planning•insights of those on the front line are increasingly important•reaction to immediate needs gains importance•need a plan to integrate these initiatives/projects.

– Continuous planning with feedback - built on four steps•knowledge building and capability evaluation•e-business design - focused on customer•e-business blueprint - create a link between the e-business design, business

goals and the technology foundation•application development and deployment•feedback is the key element in this process•trigger point planning (reactive stance) - a means to an end

• Roadmap to Moving Your company into E-Business– Getting started on the journey - two key elements

•the business strategy formulation•application framework strategy

– The phases for e-business strategy formulation:•knowledge building•capacity evaluation•e-business design

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– The phases for application framework strategy:•blueprint design•business case creation•blueprint execution

– Throw out traditional methods and acquire new skills

• Phase I: Knowledge Building– Strategy must be based on fact, not opinion about:

•the customers•customer value and relationship trends•technology trends•supply chain trends•competition and predicted moves

– Begin intelligence gathering “outside-in” not “inside-out”– Who are my customers? - categorize them (Schwab)

•life-goal planner•serious investors•hyperactive trader•one-stop shopper

– How are my customers’ priorities shifting? - listen to your customers and writedown what they say•how has customer changed in past five years, and how do you think the

customer will change in the next five years.

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– Who is my target customer?•how do I expand my customer set - i.e. my customer’s customers•who are your customers today? In order to grow the company whom

should I be targeting? What are the needs of this new customer base?– How can I add value from my target customers?

•How do you add value to customer base?•Avoid focusing too much on the competition•use technology to create new forms of value

– How do I become my customer’s first choice?•provide super service - i.e. Ritz-Carlton•provide incentives

– How does my product reach the customer?•how are my products delivered?•how many steps do they go through before they reach the customer?•how many of these steps can be eliminated?•can the Internet streamline the process?

– Do we understand the environment and industry trends?•conduct an environmental analysis using consultants•identify the trends: technology, competition, customers, demographics,

government regulation, etc.

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Page 5– Do we understand technology trends?

•analyze key trends in technologies you rely on•are you diversified or betting on a single technology

– What are the priorities in the supply chain?•analyze your partners in your supply chain•look at: cycle time, lead times, average inventories, warehousing, ideal

channels– Who are my competitors? - all of them!

•check the boundaries of your industry?•who are today's top competitors?•who are the potential upstarts?

• Phase 2: Capability Evaluation– What internal capabilities do we have today?

•strength and weakness analysis•critical elements include: customer interactions, production and

fulfillment, people, technology and core infrastructure•goodness of fit between business and information technology strategies

– What capabilities and resources do we need to execute quickly?•alignment of first vision and capabilities•linkages across functions are required•develop skills for developing enterprise architecture

Page 6• Phase 3: E-Business Design– Select an e-business design: an initial set:

•category killer - 1st to market w/killer app•channel reconfiguration - use the internet•transaction intermediary - use the internet•informediary - reduce search costs•self-service innovator•channel mastery

– E-business design refinement- critical questions•customer selection - customer segment•customer experience - what to offer-unique•customer capture - retention of the best•scope of design - critical activities and product offerings•ease of doing business - 7/24 or ??•organizational systems - capability assessment

– Clarify the differentiation levels•Pick the major dimensions of differentiation•What apps are required to support a modern flexible e-business design?

• E-Business Design in Action: The Case of E*Trade– Leading provider of on-line financial services– Differences between traditional and start-up planning (refer: Table11.3)– a ready, fire, aim approach

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• Why Startups are Successful in Creating E-Business Strategy. The logic of e-business differ along the five basic dimensions of strategy– Customer assumptions

• E*Trade added value with 24 hour service, price discounts, direct access toinformation.

• Startups don’t take their industry conditions as a given– Customer segments

• E*Trade customers - very active and loyal (96%)• competition may be in both ranks - traditional and on-line

– Customer value• E*Trade began by wanting to dominate the market• did it with low cost and high service - capturing customers from both

brokerage segments• refine core competencies needed to compete

– Resources and Capabilities• E*Trade takes a clear-slate approach what if we start anew?• E*Trade is a first mover-maintain momentum• E*Trade uses partnerships to grow• E*Trade is building brand name recognition

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– Product and service offerings• E*Trade expanding by forging new relationships, new and diversified

offerings• E*Trade is working diligently to maintain its competitive advantage.

– Future opportunities: Rethinking Organization Structure– requires an integrated infrastructure– new world has its own distinct opportunities and its own rules -

successful businesses will play by the new rules and prosper andbecome market leaders

– There will always be excuses for not creating a strategic plan - and failing

LECTURE NOTES - Translating E-Business Strategy Into Action

• Introduction– This is a prescription for how to cross the chasm between strategic planning and

execution– The purpose of a blueprint is to map a course for creating an integrated enterprise

while minimizing chaos.– Core of the blueprint planning is the relationship between value creation and

integration.– Blueprint planning addresses two requirements:

•balancing opportunities for improving application infrastructure throughprioritization.

•achieving the right product mix, so that resources are allocated in ways thatenhance the strategic direction

– The overall process - see Figure 12.1– To patch or not to patch (the existing infrastructure)

•Citibank Case - Start over from scratch°high risk - forced by competition

•many large or old companies won’t take the risk -- they patch

•Four levels of application use in business:°isolated applications - usually single function°integrated applications - i.e. call center apps., i.e. SAP°application blueprints - family of apps, i.e. CRM°enterprise framework - collection of application blueprints

•Most organizations today are at level two - integrated apps– Evaluate your own company, too often you’ll find:

•platform projects are taking too long- project gridlock•nearly all projects are high $, long term - too big•substandard projects are sucking up scarce resources•too much reinventing of the wheel•technical complexity makes decision making too hard•project interdependence is difficult to manage•lack of communication and business side buy-in

• E-Business Blueprint Creation is Serious Business– Top management must play a strong role in the process because:

•blueprint decisions are among the most important a company makes•blueprint decisions cut across product lines and divisional boundaries•blueprint decisions require resolution of cross-functional conflict

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– Major problem in blueprint creation is that everyone sees it differently -depending on where they sit.

– The problem is not Technology: The Problem is Leadership•for large, established companies the biggest impediment to blueprint planning

is the lack of consistent attention from top management•the root cause of bad planning is delegation

• Basic Steps of E-Business Blueprint Planning– Blueprint creation is a dynamic process where by a business’s list of active

projects are constantly updated and revised.– Three basic steps to e-business blueprint planning are:

•prioritization blueprint•blueprint case for action•application implementation•reference Figure 12.2

• Doing the Right Projects: A Prioritization Blueprint– How should you invest in integration?

•Management of resource allocation constitutes a critical part of e-businessblueprint planning

•development of the apps portfolio w/ integrated focus is rare

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– Current way of prioritizing projects•for business line manages to create their apps wish list they ask their

subordinates:°where do we need to spend money on app enhancements?°How much will each enhancement cost?°What will we get for the money we spend?

•Results in too many uncoordinated wish lists•Determine overall capital spending budget then allocate it among

departments.•Integration mandated from the top gets list in the jingle of capital

budgeting gains.– Types of e-business projects: incremental, break through and platform

•incremental w/ little structural change, require fewer resources, low riskand enhance existing functionality

•breakthrough or radical projects involve big changes in the firm - risky,may require clean-slate approach

•platform or next-generation projects are middle ground - create newstructural foundation to be leveraged across the organization

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Page 5– Roadmap to an Enterprise Framework Prioritization Plan - the six steps for

creating the enterprise framework prioritization plan1 Do solid up-front homework on current infrastructure and customer

priorities2 Review the current app portfolio across the firm3 Determine what needs fixing4 building in differentiation at every opportunity5 establish the desired future mix of enterprise framework functionality by

type: SCM, CRM, e-commerce.6 Decide which enterprise framework projects to start.

• Putting it all Together: The E-Business Blueprint Case– Every execution phase should begin with creating a business case - to help

establish project direction– A good business case eliminates two problems immediately:

•tendency to do nothing•tendency to treat e-business as just another project

– Goal of e-business case is to develop clarity of purpose that allows scarceresources (all of them) to be targeted for maximum results

– Who develops the e-business case: key roles -•Chief Information Officer and the Information Technology Organization•Chief Financial Officer and the Finance Organization

Page 6•Operating Vice Presidents and their respective organizations•Chief Executive Officer, President, Chief Operating Officer or General Manager•Senior Management must be visible in actively supporting the activity and being

involved

• Key Elements of a Business Case– Justification for the project

– strategic justification - identifying new capabilities toward obtaining businessobjectives

– operational justification - identifying and quantifying specific processimprovements from reengineering and the integration of the enterprise apps withthese processes

– technical justification - identifying how enterprise apps support the overalltechnical strategy of the firm

– financial justification - cost/benefit via ROI, NPV, IROR, etc. (quantifymeasures.)

– Assessing preliminary scope, key elements:– organizational - what org. units are included?– Functional - what functions, activities, models will be used?– High-level application architecture– high-level project plan - estimate implementation process– resource requirements - all internal and external resources required.

Page 7– Assessing Feasibility, along the following dimensions

• financial - assess C/B• organizational and cultural - assess the organization and culture to

accommodate a highly integrated enterprise system• technical - can the existing infrastructure support the new apps.

• Communicate, Communicate, Communicate: To Sell the E-business Case Use theseRules:– Be non-technical - exhibit the human side of IT– Address cost, risk and benefits– Be brief and succinct (ten pages or less for management reports)– communications best practices ( in creating shared values)

• create a cross-functional architecture team• take baby steps - don’t give it to them all at once• clearly communicate plans and the benefits of the new architecture• document success and publish the results• anticipate resistance

• E-Business Project Planning Checklist– develop a goal statement - in 20 words or less– set measurable goals - 5 or less– set objectives - action statement for each goal

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– Identify strategies and tactics for achieving objectives– develop short and long term action plans– gain approval - from top management and key players

• Doing the Projects Right: An Execution Blueprint: Transforming Ideas intoWorking Prototypes - A CRM Example

– Developing a CRM Execution Blueprint - the Customers RelationsManagement perspective describes how the business works:

• goals and objectives regarding customer acquisition, service andretention

• basic flows of customer information for each product or service• functions ( and cross functions) performed in CRM processes• major organizational elements and their interactions• to produce an outstanding CRM application, an outstanding execution

process is required– Rapid execution is the norm: 4 implementation imperatives

• speed - shorter time-to-market cycles• efficiency - better resource allocation decisions• flexibility - architecture decisions must allow flexibility• quality - creativity combined with integrated solutions

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– Transition management - from the old to the new• Samsonite Case: systems problem caused: $29.9 million loss, drop-in

stock price, many lawsuits, etc.

• WHY E-BUSINESS INITIATIVES FAIL - BECAUSE THEY DON’T HAVEEFFECTIVE BLUEPRINT MANAGEMENT– Weak blueprint management ⇒ to many concurrent projects

• resources and people spread too thin• projects take on a life of their own.

– Lack of effective blueprint management ⇒ no rigorous and tough decisionpoints ⇒ poor project selection

– Poor blueprint management ⇒ selecting the wrong projects, for the wrongreasons

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• Conclusion– Many profound changes are forcing organizations to rethink and broaden

their views on integration• heightened competition and increasingly sophisticated customers• current integration approaches are not quick enough• a new style of event-based app is emerging• mobile/wireless computing is becoming real everyday

– To minimize risk executive planning must include:• an application framework prioritization process to spotlight important

infrastructure projects.• A systematic way to create business cases for each infrastructure project• a development strategy that implements great ideas.