Using IT as a Competitive Weapon Group 2 Joe Brennan Joe Brennan Michelle Goff Michelle Goff Bruce Eli Johnson Bruce Eli Johnson Laura Paulick Laura Paulick

Using IT as a Using IT as a Competitive WeaponCompetitive Weapon

Group 2Group 2 Joe BrennanJoe Brennan Michelle Goff Michelle Goff Bruce Eli JohnsonBruce Eli Johnson Laura Paulick Laura Paulick Kenny YeungKenny Yeung

Col. John BoydCol. John BoydUSAFUSAF

Father of the F-15Father of the F-15 Father of the F-16Father of the F-16 Aerial Attack StudyAerial Attack Study

– First Training manual for fighter First Training manual for fighter PilotsPilots

Patterns Of ConflictPatterns Of Conflict– Concept of “fourth generation Concept of “fourth generation

warfare”warfare”– ““Asymmetric Warfare”Asymmetric Warfare”

American F86 Saber vs. Soviet MIG-American F86 Saber vs. Soviet MIG-151510-1 kill ratio in Korea, why?10-1 kill ratio in Korea, why?

OODA LoopOODA Loop

OObserve bserve OOrient rient DDecide ecide AActct– Saber pilots sat higher, joystick was hydraulic.Saber pilots sat higher, joystick was hydraulic.– ““We have to get inside their decision cycle”We have to get inside their decision cycle”

OODA LoopOODA Loop

OODA LoopOODA Loop

Information Technology that Information Technology that moves one through the OODA moves one through the OODA loop faster will give a loop faster will give a Competitive Advantage and be a Competitive Advantage and be a weapon.weapon.

Optimizing the Value ChainOptimizing the Value Chain“How Information Technology Gives you Competitive “How Information Technology Gives you Competitive

Advantage”Advantage”Michael E. Porter and Victor E. MillarMichael E. Porter and Victor E. Millar

Harvard Business Review 1985 Harvard Business Review 1985

Value ChainValue Chain– Activities connected by linkagesActivities connected by linkages

TradeoffsTradeoffs CoordinationCoordination

– Physical and Information componentPhysical and Information component To gain competitive advantage over rivals a company To gain competitive advantage over rivals a company

must either perform these activities at a lower cost or must either perform these activities at a lower cost or perform them in a way that leads to differentiation perform them in a way that leads to differentiation and a premium price.and a premium price.

Information Technology Information Technology – allows you to build more value into the productallows you to build more value into the product– helps to exploit the linkages helps to exploit the linkages – improve coordinationimprove coordination

Nature of ITNature of ITReview 9/28/2003Review 9/28/2003

CONTRIBUTIONCONTRIBUTION COMMODITYCOMMODITY DIFFERENTIATODIFFERENTIATORR

CRITICALCRITICAL Critical Critical CommoditiesCommodities

*** *** Critical Critical Differentiators ***Differentiators ***

USEFULUSEFUL Useful Useful CommoditiesCommodities

Eliminate/MigrateEliminate/Migrate

Nature of ITNature of ITReview 9/28/2003Review 9/28/2003

Critical-differentiators serve to differentiate a company from their competitors in the minds of their customers. Focus on service excellence.

Critical-commodities are systems that everyone in the industry has, but whose operations are critical. Focus on service excellence.

Useful commodities are standardized IT products and services. Focus on low costs.

Useful differentiators are expensive distractions which need to be eliminated or migrated

IT FOR COMPETITIVE IT FOR COMPETITIVE ADVANTAGEADVANTAGE

Owens & MinorOwens & Minor– Joe BrennanJoe Brennan

Political Fund-raisingPolitical Fund-raising– Laura PaulickLaura Paulick

OnStarOnStar– Michelle GoffMichelle Goff– Bruce Eli JohnsonBruce Eli Johnson

ConclusionConclusion– Bruce Eli JohnsonBruce Eli Johnson– Kenny YeungKenny Yeung


OWENS & MINOROWENS & MINOR

Owens & Minor Annual Report 2002Owens & Minor Annual Report 2002

Owens & MinorOwens & MinorBackgroundBackground

118 year old distributor of 118 year old distributor of medical and surgical supplies.medical and surgical supplies.

Fortune 500 company Fortune 500 company headquartered in Richmond, VA.headquartered in Richmond, VA.

$3.96 billion in sales$3.96 billion in sales Net Income of $48.7 millionNet Income of $48.7 million Gross Margin 10.6% of salesGross Margin 10.6% of sales

Information Week 9/22/2003Information Week 9/22/2003

Owens & MinorOwens & MinorIT OrganizationIT Organization

The CIO, David Guzman reports to the The CIO, David Guzman reports to the CEO, Gil Minor.CEO, Gil Minor.

The IT budget is traditionally 1.2% of The IT budget is traditionally 1.2% of revenue.revenue.

IT operations outsourced to Perot IT operations outsourced to Perot Systems.Systems.

165 people work on Owens & Minor 165 people work on Owens & Minor Perot team, 28% involved with new Perot team, 28% involved with new development.development.


Owens & MinorOwens & MinorIT OrganizationIT Organization

David Guzman, CIODavid Guzman, CIO

Family migrant farm workers from Family migrant farm workers from Puerto Rico who settled in NJPuerto Rico who settled in NJ

Single mother householdSingle mother household WelfareWelfare Worked in a textile mill at 12Worked in a textile mill at 12 Yale on academic scholarshipYale on academic scholarship Fist Fights with uncleFist Fights with uncle

– ““pajaritos de ambicion en tu pajaritos de ambicion en tu cabeza” cabeza”

– ““little birds of ambition in my little birds of ambition in my head”head”

Virginia Business 11/2001Virginia Business 11/2001

Owens & MinorOwens & MinorCore CompetencyCore Competency

““We are in the box moving business”,We are in the box moving business”, says CEO Gil Minor. “That is our core says CEO Gil Minor. “That is our core competency, that got us to the dance-getting competency, that got us to the dance-getting the order there on time everyday, properly the order there on time everyday, properly billed, the way the customer wants it, it’s billed, the way the customer wants it, it’s fundamental block and tackling. Believe me if fundamental block and tackling. Believe me if you mess around with that you’re really going you mess around with that you’re really going to fall on your face.”to fall on your face.”

Owens & MinorOwens & MinorEnvironment

Raw Materials Suppliers

Manufacturer Provider PatientOwens & Minor

PRODUCT

INFORMATION

Raw Materials Suppliers

Manufacturer Provider PatientOwens & Minor

PRODUCT

INFORMATION

+ 1,400 manufacturers + 4,000 Acute Care Facilities


Owens & MinorOwens & MinorEnvironmentEnvironment

For every dollar hospitals spend For every dollar hospitals spend on supplies they spend another on supplies they spend another 40 cents on supply chain 40 cents on supply chain logistics.logistics.

Hospitals buy $25 Billion worth of Hospitals buy $25 Billion worth of medical and surgical supplies medical and surgical supplies each year. each year.

Very narrow margins-10% or lessVery narrow margins-10% or less

Virginia Business 11/2001Virginia Business 11/2001

Owens & MinorOwens & MinorEnvironmentEnvironment

““Distributors of products don’t Distributors of products don’t have much say in prices, but they have much say in prices, but they can help facilities manage their can help facilities manage their costs by focusing away from costs by focusing away from product costs”, according to product costs”, according to Christopher D. McFadden, VP of Christopher D. McFadden, VP of global investment research for global investment research for Goldman Sachs & Co. in New York.Goldman Sachs & Co. in New York.

OwensOwens & Minor & MinorTraditional Distribution Business ModelTraditional Distribution Business Model

Customer

Supplier Supplier Supplier Supplier Supplier

Lab O&MAnother

Distributor

Direct

Direct

Direct{

{

EDIFax

Manual

EDIFax

Manual

OfficeProducts


Owens & MinorOwens & MinorWISDOMWISDOM

Wisdom-Wisdom-WWebebIIntelligence ntelligence SSupporting upporting DDecisions from ecisions from OOwens wens & & MMinorinor

Web-based decision support tool that allows buyers a Web-based decision support tool that allows buyers a consolidated view of their information because it interfaces consolidated view of their information because it interfaces with the health care companies ERP, material management with the health care companies ERP, material management and clinical systems. and clinical systems.

Helps hospitals monitor purchasing data and contract Helps hospitals monitor purchasing data and contract compliance via the internet.compliance via the internet.

Owens & Minor Annual Report 2000, 20Owens & Minor Annual Report 2000, 2001, 200201, 2002

Owens & MinorOwens & MinorWISDOM ImpactWISDOM Impact

Wisdom was key to winning 60million in new business and Wisdom was key to winning 60million in new business and expanding existing business by 100million in first year.1999expanding existing business by 100million in first year.1999

In 2001 over a third of OM projected 3.8 Billion in sales will In 2001 over a third of OM projected 3.8 Billion in sales will flow through wisdomflow through wisdom

Sales has grown every year since Wisdom has been Sales has grown every year since Wisdom has been instituted growing from 3.19 billion in 1999 to 3.96 last year instituted growing from 3.19 billion in 1999 to 3.96 last year in 2002.in 2002.

Sales in the current year are projected to easily surpass 4 Sales in the current year are projected to easily surpass 4 billionbillion

Profit has grown from 28 million in 1999 to 48.7 million last Profit has grown from 28 million in 1999 to 48.7 million last year. This year profit is expected to hit a new record.year. This year profit is expected to hit a new record.

Revenue increased 10 percent in 2000 to 3.5 billion, a Revenue increased 10 percent in 2000 to 3.5 billion, a company record. Overall gains by competitors is about half company record. Overall gains by competitors is about half that rate.that rate.

InformationWeekInformationWeek


Received Leadership Award from the Data Received Leadership Award from the Data Warehousing institute 1999Warehousing institute 1999

Ranked #1 Information Week 500 2001Ranked #1 Information Week 500 2001 Ranked #11 Information Week 500 2002Ranked #11 Information Week 500 2002 Ranked #1 Information Week 500 2003Ranked #1 Information Week 500 2003

Owens & Minor "Wisdom Provides a CoOwens & Minor "Wisdom Provides a Competitive Advantage at Owens & Minor"mpetitive Advantage at Owens & Minor" June 2000 June 2000


Senior Management have come Senior Management have come to view the Data Warehousing to view the Data Warehousing initiative as being so strategic initiative as being so strategic that the director of decision that the director of decision services, Don Stoller was moved services, Don Stoller was moved from the IS department to from the IS department to marketing. marketing.

Owens & Minor "Wisdom Provides CompOwens & Minor "Wisdom Provides Competitive Advantage at Owens & Minor" Juetitive Advantage at Owens & Minor" June 2000ne 2000

Owens & MinorOwens & MinorHistory of WisdomHistory of Wisdom

1995 OM purchased Stuart Medical1995 OM purchased Stuart Medical– Doubled the company from $1.5 to $3 Doubled the company from $1.5 to $3

billionbillion– Struggle to manage to dissimilar Struggle to manage to dissimilar

culturescultures– First annual loss in 114 yearsFirst annual loss in 114 years

1998 Company unexpectedly lost 1998 Company unexpectedly lost two major contracts worth $400 two major contracts worth $400 million in annual sales. million in annual sales.



1996 Don Stoller was brought on 1996 Don Stoller was brought on board to head up data board to head up data warehousing and decision warehousing and decision support systems. support systems.

Initially focused on supporting Initially focused on supporting internal users who accessed data internal users who accessed data using BusinessObjects, a leading using BusinessObjects, a leading client-server query/reporting tool. client-server query/reporting tool.



Oct. 1997 the warehouse team started to Oct. 1997 the warehouse team started to investigate moving to the web.investigate moving to the web.– Productivity-customers were asking OM’s sales Productivity-customers were asking OM’s sales

reps for more and more information. 30 reps for more and more information. 30 reports/monthreports/month

– Greater Flexibility-Many users did not need the Greater Flexibility-Many users did not need the full functionality provided by BusinessObjects.full functionality provided by BusinessObjects.

– Revenue Generator-Could charge for the Revenue Generator-Could charge for the service and be self sufficient profit center. service and be self sufficient profit center.

– Competitive Advantage-OM was the only health Competitive Advantage-OM was the only health care company positioned to offer such a servicecare company positioned to offer such a service

Oct. 1999 WISDOM is formally launchedOct. 1999 WISDOM is formally launched Spring 2000 WISDOM2 launchedSpring 2000 WISDOM2 launched

Ownes-Minor.comOwnes-Minor.com

Owens & MinorOwens & MinorWisdom2Wisdom2

Decision support data and Decision support data and purchase history for all supplies purchase history for all supplies bought be a health care bought be a health care company.company.

This includes products the OM This includes products the OM does not distribute such as does not distribute such as pharmaceuticals, patient food, pharmaceuticals, patient food, and linens and scrubs. and linens and scrubs.

Owens-Minor.comOwens-Minor.com

Owens & MinorOwens & MinorWISDOM Benefits for Health OrganizationsWISDOM Benefits for Health Organizations

Contract ComplianceContract Compliance Product StandardizationProduct Standardization Product UtilizationProduct Utilization Product UsageProduct Usage Service Level TrackingService Level Tracking

Owens-Minor.comOwens-Minor.com

Owens & MinorOwens & MinorWISDOM Benefits for SuppliersWISDOM Benefits for Suppliers

Sales and Service LevelsSales and Service Levels Contract UtilizationContract Utilization Dropship AnalysisDropship Analysis Sales penetration AnalysisSales penetration Analysis Inventory LevelsInventory Levels


Owens & MinorOwens & MinorWISDOM3? WISDOM3?

Automated replenishment via Automated replenishment via Web-services Web-services


POLITICAL FUND-RAISINGPOLITICAL FUND-RAISING

Competition to Raise Competition to Raise FundsFunds

““Company” : each candidate who Company” : each candidate who wants to raise moneywants to raise money

Presidential Election: 2004Presidential Election: 2004 Candidates compete to raise funds Candidates compete to raise funds

– Democratic candidates compete with each Democratic candidates compete with each otherother

– Democratic candidates compete with Democratic candidates compete with George W. Bush as the Republican George W. Bush as the Republican incumbent incumbent

Direct Mail Fund-Direct Mail Fund-raisingraising

Traditional fund-raising: by direct Traditional fund-raising: by direct mailmail

Survey by the Mellman Group in Survey by the Mellman Group in 19991999

Direct-mail reaches 12 million Direct-mail reaches 12 million potential donorspotential donors

Two-thirds of these donors are age Two-thirds of these donors are age 60 or older60 or older

Limitations of direct mail:Limitations of direct mail:– finite finite – AgingAging

Source: “Small Political Contributions Go a Long Way on the Internet”, The New York Times, October 19, 2003

Internet Challenge to Internet Challenge to Direct MailDirect Mail

This class reached by direct mail This class reached by direct mail is dwarfed by the potential is dwarfed by the potential internet marketinternet market

50 million people have access to 50 million people have access to the internet and report giving the internet and report giving time and money to social causestime and money to social causes


Internet: AdvantagesInternet: Advantages

Internet has low-cost processingInternet has low-cost processing Less expensive than via direct mailLess expensive than via direct mail ““Everybody now is looking for more Everybody now is looking for more

efficient ways to raise the hard money efficient ways to raise the hard money at the least amount of cost”at the least amount of cost”

– Carla Eudy, Finance Director for John McCain, 2000Carla Eudy, Finance Director for John McCain, 2000

Source: The Left’s Mr. Right, Newsweek, August 11, 2003Source: The Left’s Mr. Right, Newsweek, August 11, 2003

Internet Fund-raising: Internet Fund-raising: HistoryHistory

June 1999, Federal Election June 1999, Federal Election Commission permitted federal Commission permitted federal matching funds for credit-card matching funds for credit-card donations over the Internetdonations over the Internet

Former Democratic Presidential Former Democratic Presidential Candidate Bill Bradley lured thousands Candidate Bill Bradley lured thousands of younger, first-time givers to donate of younger, first-time givers to donate through his Web sitethrough his Web site

Was yet to utilize full potential of web Was yet to utilize full potential of web donationsdonations


Fund-raising: Fund-raising: PotentialPotential

By 2004, the Internet is expected By 2004, the Internet is expected to generate 25% of all to generate 25% of all contributions of $100 or less contributions of $100 or less – Internet enables candidates to Internet enables candidates to

broaden their appealbroaden their appeal– Internet attracts more “low-dollar” Internet attracts more “low-dollar”

donorsdonors


CompetitionCompetition

Dick Cheney went to Dick Cheney went to South Carolina, South Carolina, raising $300,000 at a raising $300,000 at a $2,000-a-plate lunch$2,000-a-plate lunch

Source: The Left’s Mr. Right, Newsweek, Source: The Left’s Mr. Right, Newsweek, August 11, 2003August 11, 2003

Howard Dean’s Web site ran this photo of him Howard Dean’s Web site ran this photo of him eating a turkey sandwich; he raised $500,000eating a turkey sandwich; he raised $500,000


Success of Howard Success of Howard Dean’s Internet SiteDean’s Internet Site

Howard Dean raised three times as much Howard Dean raised three times as much money in the last three months as his money in the last three months as his Democratic competitorsDemocratic competitors

Dean’s fund-raising in the last three months:Dean’s fund-raising in the last three months:– fed by thousands of small Internet fed by thousands of small Internet

contributionscontributions– financial front-runner in the nine-way racefinancial front-runner in the nine-way race– The fund-raising of some of his rivals The fund-raising of some of his rivals

declined in recent months. declined in recent months. Dean raised at least $14.8 million in the last Dean raised at least $14.8 million in the last

three months, closing the quarter with at least three months, closing the quarter with at least $12.4 million in the bank. He has raised $25.4 $12.4 million in the bank. He has raised $25.4 million this yearmillion this yearSource: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, 2003Source: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, 2003

Success of Howard Success of Howard Dean’s Internet SiteDean’s Internet Site

He compiled tens of thousands of small donors, He compiled tens of thousands of small donors, many of whom gave over the Internetmany of whom gave over the Internet

Internet contributions accounted for about half Internet contributions accounted for about half what was brought in this quarterwhat was brought in this quarter

Fewer than 1 percent of the campaign's Fewer than 1 percent of the campaign's contributors had reached the maximum $2,000 contributors had reached the maximum $2,000 that an individual can give to a presidential that an individual can give to a presidential candidatecandidate

The campaign may be able to continue to draw The campaign may be able to continue to draw money from its base of donors money from its base of donors

Though the campaign fell slightly short of its Though the campaign fell slightly short of its $15 million goal, it set a single-quarter record $15 million goal, it set a single-quarter record for a Democrat in a presidential race. for a Democrat in a presidential race.

Source: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, Source: “Dean Outpaces Competitors in Fund-Raising and Spending”, New York Times, Oct. 16, 20032003

Result of Fund-raising Result of Fund-raising SuccessSuccess

If the Service Employees International If the Service Employees International Union decide to endorse, Howard Dean Union decide to endorse, Howard Dean could get the backing of the largest could get the backing of the largest union of the AFL-CIOunion of the AFL-CIO

Huge blow to Dick Gephardt’s Huge blow to Dick Gephardt’s campaigncampaign

Unions initially overlooked Dean as a Unions initially overlooked Dean as a marginal candidate. That changed marginal candidate. That changed when he surged in fund-raisingwhen he surged in fund-raising

Source: www.cnn.com/2003/ALLPOLITICSSource: www.cnn.com/2003/ALLPOLITICS

Contribution PlansContribution Plans

Source: www.deanforamerica.comSource: www.deanforamerica.com

Monthly Contribution Monthly Contribution PlansPlans

Democratic Party effort to build a base of small regular donors

Same marketing used in infomercials:– people can have donations

automatically charged to their credit cards each month

Match the base accumulated over the years by the Republicans

Push within the Democratic Party to fill that void


Monthly Contribution Monthly Contribution PlansPlans

The plans appeal to constituents on The plans appeal to constituents on more modest incomes who have to more modest incomes who have to work within monthly budgets. work within monthly budgets.

In the Gephardt campaign, the In the Gephardt campaign, the average donation is $17.08. average donation is $17.08.

''A hundred dollars is a lot for someone who makes $300 a week,'' ''But I don't miss $5 a week.''


Role of New Campaign Role of New Campaign Finance RegulationsFinance Regulations

Monthly contribution plans also Monthly contribution plans also act in response to these new act in response to these new regulationsregulations

Individual contributions are Individual contributions are capped at $2,000capped at $2,000


Effects of Regulations Effects of Regulations on Competitionon Competition

''The reason that the Democrats are now having to play catch-up is because the new campaign finance laws prevent them from being funded by a small universe of very wealthy people. They are forced to find new contributors.'‘– Christine Iverson, a spokeswoman for the

Republican National CommitteeSource: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times,

October 15, 2003

Democrats Compete Democrats Compete with Republicanswith Republicans

During the last election cycle:– Two-thirds of the money from small

donations ( less than $200) went to Republicans

– The Democrats received 92 percent of unregulated contributions over $1 million.

Source: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times, October 15, 2003

Democrats Compete Democrats Compete with Republicanswith Republicans

Social conservative groups have helped the Republicans strengthen a small regular donor base using direct mail to tap into single-issue constituencies– gun control– abortion– Religion

Source: “Bush’s $70 Million War Chest Dwarfs That of Democrats”, The New York Times, October 15, 2003

Howard Dean’s Howard Dean’s Internet Plea in Internet Plea in

ResponseResponse If 2 million Americans each If 2 million Americans each

contribute $100, we will defeat contribute $100, we will defeat this president -- and we will this president -- and we will change America. The formula is change America. The formula is simple:simple:

2 million Americans x $100 = George W. Bush out of office


ONSTARONSTAR

What is OnStar?What is OnStar?

OnStar is a unique, hands-free OnStar is a unique, hands-free offering of services that enhance offering of services that enhance safety, security, entertainment, safety, security, entertainment, and productivity.and productivity.

Source: Strategy & Leadership. SlywotzSource: Strategy & Leadership. Slywotzky, Adrian. Demand Innovation: GM's Onky, Adrian. Demand Innovation: GM's OnStar Case. 2003Star Case. 2003

History of OnStarHistory of OnStar

19941994– A GM engineering group proposed Project BeaconA GM engineering group proposed Project Beacon

19951995– GM created OnStar through an alliance of 3 GM GM created OnStar through an alliance of 3 GM

unitsunits GM’s North American Operations, Electronic Data GM’s North American Operations, Electronic Data

Systems, and its Hughes Electric CorporationSystems, and its Hughes Electric Corporation

– Launched at GM’s North American OperationsLaunched at GM’s North American Operations 19961996

– GM made OnStar available in some Cadillac GM made OnStar available in some Cadillac modelsmodels

Source: Interfaces. Huber, Chet. A MultiSource: Interfaces. Huber, Chet. A Multimethod Approach for Creating New Busimethod Approach for Creating New Business Models: The General Motors OnStaness Models: The General Motors OnStar Project. 2002r Project. 2002

OnStar’s Strategy OnStar’s Strategy ProjectProject

Simulation ModelSimulation Model


Customer Acquisition Customer Acquisition and Retentionand Retention Deals with the inflow and outflow Deals with the inflow and outflow

of subscribersof subscribers Positive feedbackPositive feedback The probability of a buyer The probability of a buyer

choosing OnStar depends on choosing OnStar depends on their demand for it relative to the their demand for it relative to the demand of all the uses of moneydemand of all the uses of money


Customer Acquisition Customer Acquisition and Retentionand Retention Subscription Volume for OnStarSubscription Volume for OnStar

– 1996: 1,100 subscriptions1996: 1,100 subscriptions– 1997: 20,000 subscriptions1997: 20,000 subscriptions– 1998: 44,000 subscriptions1998: 44,000 subscriptions– 1999: 50,000 subscriptions1999: 50,000 subscriptions– 2000: 500,000 subscriptions2000: 500,000 subscriptions– 2001: 1.8 million subscriptions2001: 1.8 million subscriptions– 2002: over 2 million subscriptions2002: over 2 million subscriptions


Customer Choice and Customer Choice and AlliancesAlliances Customer ChoiceCustomer Choice

– Dependent on the Dependent on the subscription fees, subscription fees, initial costs, and initial costs, and the cost for a the cost for a combination of combination of featuresfeatures

AlliancesAlliances– Vehicle Vehicle

Manufacturer Manufacturer AlliancesAlliances

Toyota, Honda, Toyota, Honda, VW-Audi, SubaruVW-Audi, Subaru

– PartnersPartners Fidelity, ABC, Wall Fidelity, ABC, Wall

Street, ESPN, Street, ESPN, DisneyDisney


Customer ServiceCustomer Service

They must be able to match customer-They must be able to match customer-service capacity to the demand for OnStarservice capacity to the demand for OnStar– If not they:If not they:

Reduce the attractiveness of the serviceReduce the attractiveness of the service Lower acquisition of new subscribersLower acquisition of new subscribers Generate word of mouth Generate word of mouth

86% of existing customers have a better 86% of existing customers have a better peace of mind due to OnStar, 85% feel peace of mind due to OnStar, 85% feel safer at night, and 60% believe it is safer at night, and 60% believe it is important for their next car to have important for their next car to have OnStarOnStar

Source: www.onstar.com Source: www.onstar.com

Customer ServiceCustomer Service

On average, each month OnStar On average, each month OnStar responds to:responds to:– 626 air bag notifications626 air bag notifications– 655 stolen vehicle locations655 stolen vehicle locations– 13000 roadside assistance calls13000 roadside assistance calls– 14000 remote vehicle diagnostics14000 remote vehicle diagnostics– 26000 remote door unlocks26000 remote door unlocks– 260000 routing calls260000 routing calls


Dealer BehaviorDealer Behavior

Until 1998 OnStar had been installed Until 1998 OnStar had been installed by a dealerby a dealer

Since 1998 OnStar has been factory Since 1998 OnStar has been factory installedinstalled– Eliminates a need for dealers to convince Eliminates a need for dealers to convince

buyers to purchase OnStar as an optionbuyers to purchase OnStar as an option– Eliminates the cost of dealer installationEliminates the cost of dealer installation– Increases the number of cars with OnStar Increases the number of cars with OnStar

available leading to more subscribersavailable leading to more subscribers

Source: Strategy & Innovation. SlywotzkSource: Strategy & Innovation. Slywotzky, Adrain. Demand Innovation: GM's Ony, Adrain. Demand Innovation: GM's OnStar Case. 2003Star Case. 2003

FinancesFinances

SalesSales– GM 2002: $180 billion in revenueGM 2002: $180 billion in revenue– OnStar 2002: approaching $1 billion in OnStar 2002: approaching $1 billion in

annual annual revenue revenue 80% share of the telematics market in 80% share of the telematics market in

20012001 Valued between $4 to $12 billion if it Valued between $4 to $12 billion if it

were spun off as an independent were spun off as an independent businessbusiness

70% of a cost improvement in acquiring 70% of a cost improvement in acquiring new customers with factory installationnew customers with factory installation

Source: www.onstar.comSource: www.onstar.com

OnStar’s Guiding OnStar’s Guiding PrinciplesPrinciples Minimize eyes-off-the-road, hand-off-Minimize eyes-off-the-road, hand-off-

the-wheel timethe-wheel time Minimize the number of steps Minimize the number of steps

required to perform a taskrequired to perform a task Create a common interface in how Create a common interface in how

consumers interact with the systemconsumers interact with the system Utilize a lockout protocol to prevent Utilize a lockout protocol to prevent

the use of systems that create the use of systems that create unnecessary and excessive attention unnecessary and excessive attention demands on the driver demands on the driver


Critical Difference for GM Critical Difference for GM VehiclesVehicles One-touch onboard systemOne-touch onboard system

– Roadside assistance, with locationRoadside assistance, with location– Emergency servicesEmergency services– Routing and location assistanceRouting and location assistance– Automatic notification of air bag Automatic notification of air bag

deploymentdeployment– Remote door unlockRemote door unlock– Stolen vehicle trackingStolen vehicle tracking– Voice-activated cell phoneVoice-activated cell phone– Convenience ServicesConvenience Services


Critical Difference for GM Critical Difference for GM VehiclesVehicles

Convenience Services ExplainedConvenience Services Explained– Audio version of Wall Street JournalAudio version of Wall Street Journal– CNN news broadcastCNN news broadcast– Stock tradingStock trading– Hotel and dinner reservationsHotel and dinner reservations– Flower deliveryFlower delivery– Weather.comWeather.com

Makes and ModelsMakes and Models

Distribution Distribution AgreementAgreement RiverPark Inc.RiverPark Inc.

– American CoachAmerican Coach– FleetwoodFleetwood– MonacoMonaco– NewmarNewmar

Distribution Distribution AgreementAgreement ““OnStar will excel in the motor OnStar will excel in the motor

home market not only with home market not only with navigation assistance and travel navigation assistance and travel information, but especially information, but especially valuable to our customers is their valuable to our customers is their emergency services.” – emergency services.” – Mike Cloninger, Mike Cloninger,

Head of Fleetwood Product DevelopmentHead of Fleetwood Product Development


How OnStar is usedHow OnStar is used

Subscribe to one of 3 plansSubscribe to one of 3 plans– Safe & SoundSafe & Sound– Directions & ConnectionsDirections & Connections– Luxury & LeisureLuxury & Leisure



Safe & SoundSafe & Sound– Accident AssistAccident Assist– Air bag deployment notificationAir bag deployment notification– Emergency servicesEmergency services– Roadside assistanceRoadside assistance– Remote door unlockRemote door unlock– Remote diagnosticsRemote diagnostics– Stolen vehicle trackingStolen vehicle tracking– Remote horn and lightsRemote horn and lights



Directions & ConnectionsDirections & Connections– Safe & SoundSafe & Sound– Information/ConvenienceInformation/Convenience– RideAssistRideAssist– Driving directionsDriving directions



Luxury & LeisureLuxury & Leisure– Safe & SoundSafe & Sound– Directions & ConnectionsDirections & Connections– Personal ConciergePersonal Concierge



Price (Free for 1Price (Free for 1stst year, then year, then priced by month)priced by month)– Safe & Sound = $ 16.95Safe & Sound = $ 16.95– Directions & Connections = $ 34.95Directions & Connections = $ 34.95– Luxury & Leisure = $ 69.95Luxury & Leisure = $ 69.95

Special pricing and packages for Special pricing and packages for fleetsfleets



Additional services purchased by Additional services purchased by the minutethe minute– Personal CallingPersonal Calling– Virtual AdvisorVirtual Advisor


Future ServicesFuture Services

Traffic reportsTraffic reports– Will be part of Virtual Advisor.Will be part of Virtual Advisor.

How Technology How Technology WorksWorks

How Technology How Technology WorksWorks GPS and cellular reach mapGPS and cellular reach map

– http://www.onstar.com/us_english/dhttp://www.onstar.com/us_english/downloadable/gl_coverage_map_us.pownloadable/gl_coverage_map_us.pdfdf

How Technology How Technology WorksWorks Three Button SystemThree Button System

– http://www.onstar.com/us_english/jshttp://www.onstar.com/us_english/jsp/whatisonstar/idont_whatisonstar.jp/whatisonstar/idont_whatisonstar.jspsp



Sustainable FactorsSustainable Factors

First to marketFirst to market License to other companiesLicense to other companies Ford to launch similar product in Ford to launch similar product in

20052005

Strategies for SurvivalStrategies for Survival

License more companies before License more companies before Ford jumps into marketFord jumps into market

Focus on the creation of critical Focus on the creation of critical differentiatorsdifferentiators

ConclusionConclusion

First to marketFirst to market– Owens & Minor, OnStar, Political Fund-raisingOwens & Minor, OnStar, Political Fund-raising

Spawn a new businessSpawn a new business– OnStarOnStar

Spawned a new way of doing businessSpawned a new way of doing business– Political Fund-raising, Owens & MinorPolitical Fund-raising, Owens & Minor

Changed IndustryChanged Industry Business must drive IT innovationBusiness must drive IT innovation Large expenditure is not always requiredLarge expenditure is not always required

– Owens & MinorOwens & Minor Window of opportunityWindow of opportunity OODA LoopOODA Loop

ConclusionConclusion

CONTRIBUTIONCONTRIBUTION COMMODITYCOMMODITY DIFFERENTIATODIFFERENTIATORR

CRITICALCRITICAL Critical Critical CommoditiesCommodities

*** *** Critical Critical Differentiators ***Differentiators ***

USEFULUSEFUL Useful Useful CommoditiesCommodities

Eliminate/MigrateEliminate/Migrate

Documents

Using IT as a Competitive Weapon Group 2 Joe Brennan Joe Brennan Michelle Goff Michelle Goff Bruce Eli Johnson Bruce Eli Johnson Laura Paulick Laura Paulick