Chap 00

Introduction
IT
is a source of opportunity and advantage but also uncertainty and risk between viewpoints
Chasm
Business executives: IT detached from real business problems Technical executives: Business leaders lack vision
Undeniable

rapidity of change
In system architecture and interfaces In business In work and the workforce
Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009
Introduction The Embedding of IT
IT now embedded in:
Definition and execution of strategy Organization and leadership of businesses Definitions of unique value propositions
IT is changing our understanding of:
Markets Industries Strategies Firm designs
Information is now a major economic good
Introduction Riding the IT Rollercoaster
Mid 1990s:
World Wide Web demonstrated IT potential Structural and technical hurdles remained in using IT
Late 1990s:
Capital markets caught the fever Venture capitals eager to spend on IT, regardless of long-term path to profitability
21st Century:
Speculative bubble burst Downward spiral until 2003

Introduction What Now?
What we know:
World is forever changed; IT will never return to the basement Technology as core enabler, primary business channel Global village is here to stay Rigid organization boundaries have fallen
What we need to do:
Engage in sense-making of the transformation Mine the last decade of business experimentation Synthesize in order to choose a path forward
Introduction Let the Story Telling Begin

This
book examines stories of executives who are exploring uncharted waters

Through
the lens of the decades of research and experience of the authors Through rich dialogue during class discussion of chapters, cases, and articles
Introduction Focal Themes
IT and Business Advantage
IT impacts the business through its effects on the three components of the business model: strategy, capabilities, and value
The Business of IT
Managing IT operations, services, and project delivery requires managing trade-offs among costs, opportunities, and risks
High-level management, leadership, and governance activities set the context for leveraging IT-enabled strategic insight and ensuring IT operational excellence
IT Leadership
Introduction Other issues
How about legal and regulatory policy?
Facts! Business practice outpaces them
Have we full realized the impact of IT?
There are still new frontiers to explore, new challenges to meet, and new magic in store.
Introduction Goal
Help business executives
recognize the tremendous potential of technology in creating business advantage Assume a leadership role in IT-enabled business transformation
Help IT executives
Assume leadership positions, not just in defining and executing technology and managing IT function, but also in defining and executing business strategy.
Introduction
Case: IBMs Decade of Transformation: Turnaround to Growth
1914~1952: Thomas J. Watson
Dark-suited salespeople Strong corporate culture pride and loyalty Work ethic: THINK
1952~1971: Thomas Watson, Jr.
TIME Magazine's 100 most influential people of the 20th century. Invested $5 billion to develop System/360
1973~1981: Frank T. Cary
Laucned IBM PC in 1981
Introduction The Downfall Began
1984:
Returns on sales, assets, and equity began to decline very much in denial around client/server and networked computing Mainframe camps vs. PC camps.
1986~1993: John F. Akers
In 1991, earnings dropped to negative 2.8 billion. In early 1993, mainframe business was in freefall. What to do? Cost cutting, of course. But is it the ONLY solution? Or, is it a solution?
Late 1992 forecasts suggested continued losses
Introduction IBM Timeline
Introduction The Rise of the Fallen
1993~2002: Louis V. Gerstner, Jr.
The first outsider CEO in the history of the company The one who made IBM turnaround
2002~date: Samuel J. Palmisano
Introduction What Gerstner did?
Originally, his assigned job was to break up the company and sell. Make putting the customer first no more a slogan.
Heard from customers: the one thing that you guys do that no one else can do is help us integrate and create solutions. Market as One IBM Bear-hug customers Asked each executes to write two papers: one on the executives business, the other on key issues and recommendations for solving problems and pursuing opportunities. Bear-hug employees Change key employees options
Cost cutting
Benchmarking study to determine how IBMs costs in each of its business compared with those of competitors. Results in layoffs of over 75,000 employees in early 1993. Only ThinkPad was kept in the PC division IBMs internal IT organization contributed to 7 billion cost reduction
One common network protocol: TCP/IP Reduce the number of data centers (client/server and network computing) Centralized IT leadership: one CIO System development process was also reengineered: component reuse increased by 34%
By the 4th quarter of 1993, 382 million profit was posted.
Re-organization
Pull divisions into larger groups The sale organizations, which had been organized by geography and product, was re-organized into global sales teams
Changing Culture
One group of middle management (who ran IBMs country organizations) found the move to One IBM was difficult initiatives and instructions from IBM corporate needed to be customized for particular countries. We needed to have a sense that we were going to operate as a team, as a global entity.

Discussions: compare IBMs original Basic Beliefs, Gerstners eight principles, and three core values in 2003.
Reengineering Global Functions and Processes

(1) get cost out as quickly as possible; (2) clean-sheet the process and redesign it for global use Initial targets were core processes such as procurement, manufacturing, etc. (results: costs down and development time decreased) If there was someone on the outside that could perform the activity better, faster, and cheaper than us, we outsourced the physical activity and kept the strategy, planning, and management.
Sought a unifying strategic vision to serve as a platform to reignite growth and industry leadership
Due to the success of 1994 IBMs Winter Olympic Web site, web movement became a corporate strategy led by Abby Kohnstamm In 11/1995, Gerstner announced e-Business as IBMs strategic vision. Internet and strategy A shift to network computing (which required increasingly powerful computers called servers) Questions: compared to current terms cloud computing, web services, SaaS (Software as a Service), etc.
Then what?
Introduction IBMs Network Computing Vision
Introduction Then what?
Middleware becomes important Served as the interconnections between distributed data sources, applications, and computers. In 1995, acquired Lotus (a collaborative messaging/middleware platform)
Shifting
focus from proprietary to open technology

the integration point
Provide
By
2000, IBM Global Services had grown to the worlds largest IT consulting and Web services organization.
Introduction Organizing for Growth

By
09/1999, revenue growth is 5.7%. (below the red-hot technology industry average)
Seeking
for new businesses, but many failed
Pre-occupied
with current markets; current approach is inadequate for emerging markets (rewards based on shortterm results; business models, etc.); lack established disciplines and processes for selecting, experimenting, funding, and terminating new businesses; and poor execution research conclusions made by B. Harreld (head of corporate strategy)
Introduction Best Practices for Commercializing Innovation

Harreld
H1
learned from The Alchemy of Growth
businesses were mature and well established and accounted for the bulk of profits and cash flow H2 business were on the rise and experiencing rapid, accelerating growth H3 businesses were emerging and represented the seeds of a companys future strategy
Read thru Exhibit 9 (p.29-30)
IBMs
problem lied in using one approach for all 3 types of businesses.

Categorized
The
IBMs businesses as H1, H2, and H3
Corporate Strategy group continuously monitored H3 businesses H3 businesses would be designated as Emerging Business Opportunities (EBOs)
Problems: selection of EBOs, where to put EBOs in the companys architecture. Due to One IBM vision, they chose centralized model (under supervision of Corporate Executive Committee; CEC). Gerstner prompted Thompson as EBO czar Under Thompson, the corporate EBO process functioned effectively but relatively informally for its first two years.

The
criteria for selecting EBOs:
The
need for cross-business cooperation and resources The maturity of the business plan and strategy (eg., key market and technology risks appeared manageable and expertise was available to build the first offering and take it to the market) The forecasted size of the market The potential for generating over $1 billion in three to five years

The
evaluation for EBOs performance:
Like traditional approach, each EBO head had to report progress, discuss plans, and solve problems Not focus on financial performance versus plan, focus on verifications and refinement of business plans and measurement on the progress made as the EBO moved thru the innovation process. Clarified assumptions and risks; and assessed progress against key project-based milestones. Success against these project-based milestones could include clarifying market demand and willingness to pay by interviewing key customers or reducing technology risk by completing a key phase of the product development process.

Categories
of Risks and Uncertainty (& Sample Approaches and Project-based Metrics) in Exhibit 11. (read thru them)
Market/User Adoption Risk and Uncertainty Technology/Product Risk and Uncertainty Resource Risk and Uncertainty Implementation Risk and Uncertainty
By
2003, revenue growth up 2%
Life Science and Business Transformation Services: $1 billion Linux: $2 billion Pervasive computing (or Ubiquitous computing): $2.4 billion
Introduction
IT Impact Map: IBM Path to Business Transformation

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Chap 00

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Introduction

In system architecture and interfaces In business In work and the workforce

Introduction The Embedding of IT

IT now embedded in:

IT is changing our understanding of:

Markets Industries Strategies Firm designs

Information is now a major economic good

Introduction Riding the IT Rollercoaster

Speculative bubble burst Downward spiral until 2003

Introduction What Now?

What we need to do:

Introduction Let the Story Telling Begin

book examines stories of executives who are exploring uncharted waters

Introduction Focal Themes

IT and Business Advantage

Introduction Other issues

How about legal and regulatory policy?

Facts! Business practice outpaces them

Have we full realized the impact of IT?

Help business executives

1914~1952: Thomas J. Watson

1952~1971: Thomas Watson, Jr.

1973~1981: Frank T. Cary

Laucned IBM PC in 1981

Introduction The Downfall Began

1986~1993: John F. Akers

Late 1992 forecasts suggested continued losses

Introduction IBM Timeline

Introduction The Rise of the Fallen

1993~2002: Louis V. Gerstner, Jr.

2002~date: Samuel J. Palmisano

Introduction What Gerstner did?

Introduction What Gerstner did?

By the 4th quarter of 1993, 382 million profit was posted.

Introduction What Gerstner did?

Introduction What Gerstner did?

Reengineering Global Functions and Processes

Introduction What Gerstner did?

Introduction IBMs Network Computing Vision

Introduction Then what?

focus from proprietary to open technology

Introduction Organizing for Growth

for new businesses, but many failed

Introduction Best Practices for Commercializing Innovation

learned from The Alchemy of Growth

Read thru Exhibit 9 (p.29-30)

problem lied in using one approach for all 3 types of businesses.

Introduction Best Practices for Commercializing Innovation

IBMs businesses as H1, H2, and H3

Introduction Best Practices for Commercializing Innovation

criteria for selecting EBOs:

Introduction Best Practices for Commercializing Innovation

evaluation for EBOs performance:

Introduction Best Practices for Commercializing Innovation

2003, revenue growth up 2%

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