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IT strategy – eBusiness (ch. 3 + more)

IT strategy Business Process Reenginering

(extended) eBusiness

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IT revolution IT for most administrative functions Standards and technology for

integrating systems Big effects, but for all (IT as a

commodity) Requirements:

High formalization level Symbolic tasks

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Examples

FunksjFunction Before Now Bank Personal visit, phone,

the bank employee used the terminal, paper

The customer does the job

Industry paper based B2B, B2C, automation

Administration Memos, binders, letters e-mail, Intranet

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Strategic use of IT

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Our textbook Focus for different editions

End user computing (1986) Strategic advantages (1989) Reengineering (1993) Internet, intranet and extranet (1997) eBusiness (2001) Knowledge based work (2004-2006) Konsolidering - mer om sikkerhet (2009)

Note: All areas are important today, the textbook has just focused on the ”hot” topic of the year

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Important trends for IT: Flow of money go digital and automatic Point of sale terminals JIT (just in time), Lean, ERP (enterprise resource planning) XML will be important for B2B, in addition to EDI Digitalization (sound, pictures, books, etc) “Long tail” effects Distributed work will be more common Electronic cooperation between organizations (B2B) Reorganizations will occur more often Global operations, new markets in emerging countries, use of

IT to connect

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But: We have to be aware of the

fundamental limitations for IT: Formalization Standards Largest effect where everything is symbolic

Other limitations: Technical Cultural Social Security

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Real possibilities := theoretical possibilities - constraints

Teoretical possibilities

ConstraintsConstraints

Constraints

Real possibilities

Real possibilities

Real possibilities

Real possibilities

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BPR: Internally BPR, ”Business Process Reengineering” Success- (and fiasco-) criteria:

Growth and expansion better than reduction Both internal and external actors

(employees, customers, suppliers) Driven by management Use of technology to drive change goes

seldom well IT offers possibilities, but shall not drive Good understanding of technology is

important

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BPR BPR ”hot” in the middle of the nineties,

replaced by eBusiness today (also in our textbook).

BPR is important, especially due to the possibilities offered by the Internet and Web.

Internet and Web offer the possibility of radical change

- and in this respect has much in common with BPR

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BPR: Revolution Start with a blank sheet, do everything from start (Hammer

and Champy). Revolutionary approach (30-50% chance of success) Analysis:

Starting again we can use today's technology in implementing business processes

but, should we also demand that customers or suppliers change their processes dramatically?

and to we have the complete overview when we redesign and what about the problem of moving from one system

to a completely new? and then, should we relax until the next revolution comes

along?

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Ford Motor Company

Ford reduced the number of employees in their procurement departments from 5000 to 700

But, Toyota (larger than Ford) had 7 in their procurement division!

Efficiency

What did they do? Suppliers had access to

Toyota’s systems Then orders became

unnecessary Invoicing disappeared Thus, instead of using IT

to make the paper work more efficient, the need for the data (orders, receiving control, invoicing, etc.) were removed

Dramatic savings

The idea – think new!

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BPR: Evolution Continuous improvement (TQM - Total

Quality Management) Risk: changes may only be superficially,

nothing is done with the more deeper structures

Conservatism, complacency, etc. is there to stop fundamental changes

The danger of “positive thinking”

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Case: Prudence Insurance New ways of selling insurance Improved customer contact ”Profiling” of customers IT system with all customer data Implemented office to office, got

experience as the work progressed, enthusiasm, knowledge

An experienced sales manager in charge – enjoyed much respect in the organization

More sales, more commission, improved customer contact

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Case: insurance Other companies used the same package It worked for some, not for others Factors to fail:

Laissez-faire approach Only supported by head office It was up to the agents themselves if they wanted to

use the new method No training

Moral: Implementation is important It is not easy to copy others successes

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BPR: Choices

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eBusiness B2E - Business-to-Employee B2C - Business-to-Consumer (B2C =

B2E) B2B - Business-to-Business

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B2E Intranet Links to Internet ”Best practices” Common functionality (database

access, ordering of office supplies…) Portfolio of tools Replaces paper. Can be accessed from everywhere Standard technology (browsers etc)

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Case: Microsoft “Human Relations” system:

Health plan Stock options Pension plans salary Office supplies.

Intranet Integrated with ERP (SAP R/3) Reduced costs for material etc. by 75-90% Replaced more than 200 paper forms Saved $1 million each year In addition, reduced workload for employees in addition

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B2C The “terminal” is given to the customer Intermediates can be removed The customer is given direct access to

data and functions Often a better service at reduced costs Revolution!

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B2C models Internet only (click) Internet + brick and mortar = brick and click Important questions:

can all services be performed over the Internet? can traditional services be left for others to perform do the customer need both the brick and the click

services?

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B2C advantages Global access Improved access (24*7*52) Automatic order handling Automatic dissemination of information Updated information Symbolic products can be downloaded New products and services Improved communication with customers (or

the opposite?) Customer loyalty (?) Direct marketing

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B2C problems User Interface (may be difficult to use) Takes time Logistics, reverse logistics Unstable customer base (too many

potential customers) Global regulations (many are selling

only nationally) Competition Information to competitors Can we trust ”dot-coms”?

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Case: Internet shopping Online grocer:

Failed (Rema) Failed after huge

losses (Webvan, IHG)

Distribution costs Formalizing of

products Niches?

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case: Stop & Shop

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e-Business models New requirements from customers

simple access customization (?) new services (e.g., from bank to music)

Relations with partners: Remove intermediates (travel agency, bank) Virtual organizations

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Case: Banking More than 98% of all

transactions are digital

If we do the job ourselves we want something back (as free services)

Internet banks are increasing their customer base

Is a bank a computer?

Ideal application for B2C?

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Norge tidlig uteDet var administrerende direktør Harry Konterud i Sparebanken Hedmark som brøytet vei for banktjenester på internett.

- Jeg hentet ideen fra en studietur til USA i 1994, og tenkte dette skal vi ha. Men vi ble rett og slett frarådet å satse på nettbank i 1996. Den gang mente mange at sikkerheten rett og slett var altfor dårlig, og det var det største ankepunktet mot å overføre penger og å betale regninger på internett.

- Men vi har ikke tapt en eneste krone på dette, bank i bordet, sier Konterud, som har vært sjef i 21 år i det som nå er landets sjette største sparebank med 150 000 kunder.

I 1996 kappløp Sparebanken Hedmark mot LO-eide Landsbanken om å være først ute med nettbank, og slo konkurrenten på målstreken. I sommer knivet banken igjen om å være den første med mobilbank.

Aftenposten, 30.09.06

Men Bankene etablerte internett tjenester, men

forstod kanskje ikke helt hvilken endringer denne teknologien ville medføre

For bank er brick & click en meget god løsning for kundene

Men det krever at bankene kan tilby konkurransedyktige click tjenester, som er de vi bruker mest

Dessuten, i dag kan kundene få dette ved å ha konto i en ren Internett bank og konto i en fysisk bank. Men dette er ikke en god modell for den fysiske banken.

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Case: Travel agency

Still existing? Not all customers use Internet

today But in a few years time? Ideal for brick & click?

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B2B (Business-to-Business) Since 1950 EDI from 1975 VAN (Value Added Networks) XML, XML/EDI Integration of value chains Demand:

Good IT infrastructure Formalized data and services Willingness to think ahead Accept for standards

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XML <?Xml version=”1.0”?> <!doctype address SYSTEM “address.dtd”> <address> <street>2000 Fifth Avenue</street> <city>Pittsburgh</city> <zipcode>PA 15260</zipcode> </address>

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XML: namespaces <item

xmlns:invoice=http://www.acmeinc.com/inv xmlns:delivery=http://www.acmeinc.com/deliv> <invoice:street>P.O.Box 5440 </invoice: street > <delivery: street > 45 Main St</delivery: street >

</item> namespaces define ”scope” for name

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XML: Schema Describe document structure Ideas from programming languages and

databases DOM (Document Object Model) – document

structure description XPath XSL (eXtensible Stylesheet Language) and XSLT

can we transform XML to other forms, e.g., to HTML

An XML structure can be input to a program or a browser

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XML: way ahead Much optimism (or ”hype”) Slower than expected – formalization required Is it too complicated? Competition from alternatives (HTML, Excel,

database formats, ASCII) Establishment of standards is a social process Not everybody benefits However: XML will be used

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Electronic markets

Oil companies (Norway, abroad) Markets for fish, vegetables, etc. Market for Norwegian communities

(kommuner, fylker) – No success! COVISINT – International electronic market

Used by Ford, GM, DaimlerChrysler Offer supply services

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Covisint

Nå helse-tjenester itillegg til bilindustri.

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Covisint

As a globally recognized leader of interoperability solutions and services, Covisint creates value for organizations of any size by connecting people and systems across industries. Our goal is delivering innovation to customers, enabling and assisting them in maintaining a competitive advantage.

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A success?

Covisint today supports over 266,000 users, representing more than 30,000 organizations in over 96 countries in the global automotive industry, and supports seven languages.

Covisint also supports over 14,000 users, representing more than 78 health systems, nine state Medicaid programs, 11 commercial payers and over 300 physician groups/practices, home health agencies, third-party administrators, extended care facilities and home medical equipment providers across the North American healthcare continuum.

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eBusiness factors

Technology Security Regulations Copyright Online contracts and signing Culture Competition