Introduction Challenges of Managing in a Network Economy
Evolution of Compu ting Performa nce
Price Performance Trends of Mainframes and PCs
$/MIPs 1,000,000
8:1*
100.000
Mainframe
10,000
286:1*
1,000
PCs and workstations
100
900:1*
10
1 1980 *Ratio of MIPs per Dollars (Mainframes:PCs) 1990 1996
Adapted from: McKenney, J., Waves of Change: Business Evolution through Information Technology , Boston: Harvard Business School Press, 1995.
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McFarla n., Corporate I nfor mation Strategy and Management . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002.
I ntroduction Figure I-1
Themes presented in this book
Market structure and industry dynamics Evolving business models IT impact Prioritizing IT investment Assimilation and organizational learning Buy versus make Partnership among key constituencies as IT evolves Protecting IT assets and managing risks Pervasive computing
Theme 1: Market Structure and Industry Dynamics
New choices for designing and building industries, markets, and organizations. IT expands processing capacity enabling convergence of voice, video, and data. Real-time transactions, interactivity and connectivity.
The Value Ch ain Defines Ind ust ry Str uctu re a nd Relationships
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002.
Chapter 1 Figur e 1-3
Theme 2: Evolving Business Models
The business models that dominated the Industrial Economy are evolving to take advantage of the capabilities of the new technologies and business practices of the Network economy, giving rise to new sources of power and differentiation.
Componen ts of a Business Model
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McFarla n, Corporate I nfor mation Strategy and Management . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002.
Chapter 2 Figur e 2-1
Theme 3: IT Impact
Important dimensions are:
The impact of IT on core operations and The impact of IT on core strategy.
The Impact of IT
High
Factory
IT Impact on Core Operations
Goal: Improve performance of core processes Leadership: Business unit executives Project Management: Process reengineering
Strategic
Goal: Transform organization or industry Leadership: Senior executives & board Project Management: Change management
Support
Goal: Improve local performance Leadership: Local level oversight Project Management: Grassroots experimentation
Turnaround
Goal: Identify and launch new ventures Leadership: Venture incubation unit Project Management: New venture development High
Low
IT Impact on Core Strategy
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McFarla n., Corporate I nfor mation Strategy and Management . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002.
I ntroduction Figure I-4
Theme 4: Prioritizing IT Investments
Shift in IT investment priorities and decisions from a cost-avoidance, project centered approach to an asset-based, strategic option approach.
The IT Business Value Scorecard
Goals and Measures Categories of Table Benefits 4-2:
The IT Business Value Scorecard
Internal
External
Type I: Benefits from Investments in a Networked IT Infrastructure
Functionality and Flexibility
Improve infrastructure performance; increase the functionality and range of strategic options that can be pursued Sample Measures: Decrease the cost and/or improve the performance of internal IT operations; enable new IT applications to be created at lower cost, in less time, and with less risk; expand the range of internal IT initiatives
Create an efficient, flexible online/offline platform for doing business with customers, suppliers, and partners Sample Measures: Decrease the cost and/or improve the performance of doing business online; decrease the time, cost and risk of launching new online business initiatives; expand the reach of existing IT enabled businesses and the range of business opportunities that can be pursued.
The IT Business Value Scorecard Contd.
Categories of Benefits Commerce Goals and Measures
Internal
External
Type II: Benefits from Doing Business on a Networked IT Infrastructure Improve internal operating Streamline and integrate channels efficiency and quality to market, create new Sample Measures: Internal channels, and integrate multiple online/offline channels process performance and work flow improvements; cost Sample Measures: Supply chain or savings or cost avoidance; distribution channel increased quality; decreased performance improvements; cycle time cost savings or cost avoidance for the organization and its customers, suppliers, or partners; decrease time to market or just-in-time order replenishment; enable new channels to market and/or extend the reach and range of existing channels
The IT Business Value Scorecard Contd.
Categories of Benefits Content / Knowledge Goals and Measures Internal External
Type II: Benefits from Doing Business on a Networked IT Infrastructure Improve the performance of Improve the performance of knowledge workers and enhance knowledge workers in customer, organizational learning supplier, and partner Sample Measures: Enable organizations; add information individuals to achieve and exceed value to existing products and personal performance goals; services; create new informationbased products and services increase the speed and effectiveness of decision making; Sample Measures: Provide increase the ability of the information to customers, organization to respond quickly suppliers, and partners that and effectively to threats and enables better decision-making; opportunities charge a price premium for products and services based on information value-added; launch new information-based products and services; increase revenue per users and add new revenue streams
The IT Business Value Scorecard Contd.
Categories of Benefits Community Goals and Measures
Internal
External
Type II: Benefits from Doing Business on a Networked IT Infrastructure Attract and retain top talent; increase satisfaction, engagement, and loyalty; create a culture of involvement, motivation, trust, and shared purpose Sample Measures: Length of time to fill key positions; attrition rate, trends in hiring and retaining top talent (over time, by industry, by region) Attract and retain high quality customers, suppliers, partners, and investors; increase external stakeholders satisfaction, engagement, and loyalty Sample Measures: Customer, supplier, partner satisfaction and lifetime value; average revenues per customer and trend over time; level of personalization available and % that use it; churn rate
Theme 5: Assimilation and Organizational Learning
The time required for successful organizational learning and assimilation of rapidly changing technologies limits the practical speed of change.
Identifying and Assimilating IT
Phase 1 Opportunity Identification and Investment Success Lack of attention and commitment
Phase 2 Organizational Learning and Adaptation Success
Stagnation Block A Narrowly focused and not marketed
Phase 3 Rationalization and Continuous Evolution Success
Stagnation Block B
Too efficiency dominated
Stagnation Block C
Widespread Technology Transfer
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan., Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002. Introduction Figure I-5
Theme 6: Buy versus Make
External industry, internal organizational, and technological changes are increasing the pressure on organizations to buy rather than make IT applications and services.
Theme 7: Partnerships among Key Constituencies as IT Evolves
High levels of engagement and cooperation among four key constituencies:
Business Executives IT Executives Users Technology Providers / Partners
Three Er as of IT Evolution
Administrative Framework Target for IT Use Justification/ Benefits
Era I Mainframe
Regulated monopoly
Back office automation
Organizational productivity
Era II Microcomputer
Free market
Individual decisionmaking and productivity Electronic integration and learning
Individual effectiveness
Era III Internetworking
Shared partnership
Business advantage
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McFarla n., Corporate I nfor mation Strategy and Management . Bur r Ridge, IL: McGr aw-Hill/Irwin, 2002.
I ntroduction Figure I-6
Theme 8: Protecting IT Assets and Managing Risks
The ability to ensure high levels of security, privacy, reliability, and availability is a core capability that determines an organizations ultimate success and survival.
Theme 9: Pervasive Computing: Opportunities and Risks
Shift in IT that has dramatically changed the way people access and use technology, the way organizations exploit it, and the way it is developed and managed.
