Chapter 5 – Organizational Structures that Support Strategic Initiatives

ORGANIZATIONAL STRUCTURES

• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages.
• Ethics and security are two fundamental building blocks that organizations must base their businesses upon.

INFORMATION TECHNOLOGY ROLES AND RESPONSIBILITIES

• Information technology is a relatively new functional area, having only been around formally for around 40 years.
• Recent IT – related strategic positions:

             -   Chief Information Officer (CIO)

             -   Chief Technology Officer (CTO)

             -   Chief Security Officer (CSO)

             -   Chief Privacy Officer (CPO)

             -   Chief Knowledge Officer (CKO)

 Chief Information Officer (CIO) – oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives.

-  Broad CIO functions include;

•  Manager – ensuring the delivery of all IT projects, on time and within budget.
• Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization.
• Communicator – building and maintaining strong executive relationships.

  Average CIO compensation by industry

Industry	Average CIO Compensation
Wholesale/Retail/Distribution	$ 243,304
Finance	$ 210,547
Insurance	$ 197,697
Manufacturing	$ 190,250
Medical/Dental/Health Care	$ 171,032
Government	$ 118,359
Education	$   93,750

·         What concerns CIOs the most

Percentages %	CIOs Concerns
94	Enhancing customer satisfaction
92	Security
89	Technology evaluation
87	Budgeting
83	Staffing
66	ROI analysis
64	Building new applications
45	Outsourcing hosting

o     Chief Technology Officer (CTO) – responsible for ensuring the throughput , speed, accuracy, availability and reliability of IT

o    Chief Security Officer (CSO) – responsible for ensuring the security of IT systems

o   Chief Privacy Officer (CPO) – responsible for ensuring the ethical and legal use of information

o   Chief Knowledge Officer (CKO) – responsible for collecting, maintaining and distributing the organization’s knowledge

THE GAP BETWEEN BUSINESS PERSONNEL AND IT PRSONNEL

•  Business personnel possess expertise in functional areas such as marketing, accounting and sales
•  IT personnel have the technological expertise
• This typically causes a communications gap between the business personnel and IT personnel

IMPROVING COMMUNICATIONS

• Business personnel must seek to increase their understanding of IT
• IT personnel must seek to increase their understanding of the business
•  It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel

ORGANIZATIONAL FUNDAMENTALS – ETHICS AND SECURITY

•  Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful
• In recent years, such event as the 9/11 have shed new light on the meaning of ethics and security

ETHICS 

• Ethics – the principles and standards that guide our behavior toward other people
• Privacy is a major ethical issues;

• Privacy – the right to be left alone when you want to be to have control ever your own personnel possessions and not to be observed without your consent

• Issues affected by technology advances

Intelligent property	Intangible creative work that is embodied in physical form
Copyright	The legal protection afforded an expression of an idea, such as a song, video game and some types of proprietary documents
Fair use doctrine	In certain situations, it is legal to use copyrighted material
Pirated software	The unauthorized use, duplication, distribution or sale of copyrighted software
Counterfeit software	Software that is manufactured to lock like the real thing and sold as such

•  One of the main ingredients in trust is privacy
• Primary reasons privacy issues lost trust for e-business

1.	Loss of personnel privacy is a top concern for Americans in the 21stcentury
2.	Among Internet users, 37 percent would be “a lot” more inclined to purchase a product on a websites that had a privacy policy
3.	Privacy/security is the number one factors that would convert Internet researchers into Internet buyers

SECURITY – HOW MUCH WILL DOWNTIME COST YOUR BUSINESS??

Sources of Unplanned Downtime
Bomb threat	Hacker	Snowstorm
Burst pipe	Hail	Sprinkler malfunction
Chemical spill	Hurricane	Static electricity
Construction	Ice storm	Strike
Corrupted data	Insects	Terrorism
Earthquake	Lightning	Theft
Electrical short	Network failure	Tornado
Epidemic	Plane crash	Train derailment
Equipment failure	Frozen pipe	Smoke damage
Evacuation	Power outage	Vandalism
Explosion	Power surge	Vehicle crash
Fire	Rodents	Virus
Flood	Sabotage	Water damage (various)
Fraud	Shredded data	Wind

·         How much will downtime cost your business??

PROTECTING INTELLECTUAL ASSETS

·         Organizational information is intellectual capital – it must be protected

·         Information security – the protection of information from accidental or intentional misuse by persons inside or outside an organization

·         E-business automatically crates tremendous information security risks for organization

Chapter 4

Chapter 4

Chapter 4 – Measuring the Success of Strategic Initiatives

MEASURING INFORMATION TECHNOLOGY’S SUCCESS

• -          Key performance indicator – measures that are tied to business drivers
• -          Metrics are detailed measures that feed KPIs
• -          Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals

EFFICIENCY AND EFFECTIVENESS

• -          Efficiency IT metric – measures the performance of the IT system itself including throughput, speed, and availability
• -          Effectiveness IT metric – measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases

BENCHMARKING – BASELINE METRICS

• -          Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain
• -          Benchmarking – a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and producers to improve system performance.

EFFICIENCY IT METRIC

• measure the performance of the IT system itself including throughout,speed and availability.
• lots of useful information

EFFECTIVENESS IT METRIC

• measure the impact it has on business processes and activities including customer satisfaction, conversation rates, and sell-through increases.
• the extent to which our services are prefer by many consumers.

METRICS FOR STRATEGIC INITIATIVES

-          Metrics for measuring and managing strategic initiatives include;

·         Website metrics.

·         Supply chain management (SCM) metrics

·         Customer relationship management (CRM) metrics

·         Business process reengineering (BPR) metrics

·         Enterprise resource planning (ERP) metrics 

WEBSITE METRICS

SUPPLY CHAIN MANAGEMENT METRICS 

CUSTOMER RELATIONSHIP MANAGEMENT METRICS

BPR and ERP Metrics

-          The balanced scorecard enables organizations to measure and manage strategic initiatives. 

Chapter 3

Chapter 3

Chapter 3 (Strategic Initiatives for Implementing Competitive Advantages)

After study this chapter we would able to list and describe the four basic components of supply chain management

§  Supply chain strategy is the strategy for managing all the resources required to meet customer demand for all products and services

§  Supply chain partners are the partners chosen to deliver finished products, raw materials, and services including pricing, delivery, and payment processes along with partner relationship monitoring metrics

§  Supply chain operation is the schedule for production activities including testing, packaging, and preparation for delivery

§  Supply chain logistics is the product delivery processes and elements including orders, warehouses, carriers, defective product returns, and invoicing

Strategic Initiatives

ü   Supply chain management (SCM)

ü   Customer relationship management (CRM)

ü   Business process reengineering (BPR)

ü   Enterprise resource planning (ERP)

 What is Supply Chain Management?

Supply Chain Management (SCM) can be defined as the involves in management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

There are four basic components of Supply Chain Management which come under

o   Supply chain strategy – strategy for managing all resources to meet customer demand

o   Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

o   Supply chain operation – schedule for production activities

o   Supply chain logistics – product delivery process

Effective and efficient SCM systems can enable an organization to

v Decrease the power of its buyers.

v Increase its own supplier power.

v Increase switching costs to reduce the threat of substitute products or services.

v Create entry barriers thereby reducing the threat of new entrants.

v Increase efficiencies while seeking a competitive advantage through cost leadership.

What is Customer Relationship Management?

CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level.  If an organization does not embrace CRM on an enterprisewide level it will have a difficult time gaining a complete view of its customers.  CRM can enable an organization to identify types of customers, design specific marketing campaigns tailored to each individual customer, and understand customer-buying behaviors.

Customer Relationship Management also involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability

Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

Business Process Reengineering

Ø Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

Ø Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises

The purpose of BPR is to make all business processes best-in-class

What is Enterprise Resource Planning?

•         It is a systems collection data from across an organization and correlates the data generating an enterprise wide view

chapter 2 :identifying competitive advantages

Chapter 2 Identifying Competitive Advantages

What is competitive advantage?

• A product or service that an organization’s customers place a greater value on than similar offerings from a competitor.
• Unfortunately, CA is temporary because competitors keep duplicate the strategy. 
• Then, the company should start the new competitive advantage.

Five forces Model

Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment

• Buyer power
• Supplier power
• Threat of substitute products or services.
• Threats of new entrants.
• Rivalry among existing companies.

Buyer power 

• High – when buyers have many choices of whom to buy.
• Low – when their choices are few.
• To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors.
• Best practices of IT-based

Supplier power

• High – when buyers have few choices of whom to buy from. 
• Low – when their choices are many.
• Best practices of IT to create competitive advantage.
• E.g. B2B marketplace – private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who  would care to bid. Reverse auction is an auction format in which increasingly lower bids. 

Threat of Substitute products & Services

• High – when there are many alternatives to a product or service. 
• Low – when there are few alternatives from which to choose.
• Ideally, an organization would like to be on a market in which there are few substitutes of their product or services. 
• Best practices of IT 
• E.g. Electronic product -same function different brands

Threat of new entrants

• High – when it is easy for new competitors to enter a market.
• Low – when there are significant entry barriers to entering a market. 
• Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.
• Best practices of IT
• E.g. new bank must offers online paying bills, acc monitoring to compete.

Rivalry among existence competitors

• High – when competition is fierce in a market
• Low – when competition is more complacent
• Best Practices of IT
• Wal-mart and its suppliers using IT-enabled system for communication and track product at aisles by effective tagging system. 
• Reduce cost by using effective supply chain.

The Three Generics Strategies

Cost Leadership

• Becoming a low-cost producer in the industry allows the company to lower prices to customers.  
• Competitors with higher costs cannot afford to compete with the low-cost leader on price.

 Differentiation

• Create competitive advantage by distinguishing their products on one or more features important to their customers.  
• Unique features or benefits may justify price differences and/or stimulate demand.
• Ex: i-care by Proton 

The Value Chains- Targeting Business Processes

• Supply Chain - a chain or series of processes that adds value to product & service for customer.
• Add value to its products and services that support a profit margin for the firm

business driven technology

Information technology (IT) – a field concerned with the use of technology in managing and processing information.

Information technology is an important enabler of business success and innovation.

Management information systems (MIS) – a general name for the business function and academic discipline covering the application of people, technologies, and procedures  to solve business problems
MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources

When beginning to learn about information technology it is important to understand

– Data, information, and business intelligence IT resources
– IT cultures


Data - raw facts that describe the characteristic of an event

Information - data converted into a meaningful and useful context

Business intelligence – applications and technologies that are used to support decision-making efforts

Information-Functional Culture - Employees use information as a means of exercising influence or power over others. For example, a manager in sales refuses to share information with marketing. This causes marketing to need the sales manager’s input each time a new sales strategy is developed

Information-Sharing Culture  - Employees across departments trust each other to use information (especially about problems and failures) to improve performance

Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions

Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages