LECTURE NOTES - FROM E-COMMERCE TO E-BUSINESS

Introduction New Economy, New Tools, New Rules The streamlining of products, interactions, and payments between customers companies - suppliers Structural transformation of internal foundations Three questions businesses must answer How will e-commerce change our customer priorities? How can we construct a business design to meet these new customer priorities? What technology investments must we make to survive, to thrive? Are you and your organization ready to build a strategy to be a player in ebusiness? What makes a company successful in e-business

 Examine your world - your organization Look at the problems preoccupying senior management and look at current priorities: market share versus short-term profit, revenue growth versus cost What are the high profit projects directed toward accomplishing these priorities Consider the digital future, how will you compete with firms that dont have your companys baggage: legacy application, calcified processes, inflexible business models, etc. Question your Companys strategy Does your senior management clearly understand the changes to your industry caused by e-business? Any blind spots, flawed assumptions? Does senior management recognize the threat posed by new unconventional rivals? Will changes to the business model Be too late? Are the right priorities being set and executed? Are you and your company really ready to execute change? Understand the implementation side of strategy? Know that business platform is being transformed by a new generation of enterprise applications? Understand the risks, challenges and problems arising from engaging in ebusiness?

Rules for Doing E-Business Rule 1: Technology is no longer an afterthought in forming business strategy, but the actual cause and driver. The ability to streamline the structure, influence, and control of the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products. Inability to overthrow the dominant, outdated business design often leads to business failure.

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The goal of new business designs is to create flexible outsourcing alliances between companies that not only off-load costs, but also make customers ecstatic. Rule 5: E-commerce is enabling companies to listen to their customers and become either the cheapest, the most familiar, or the best. Rule 6: Dont use technology just to create the product. Use technology to innovate, entertain, and enhance the entire experience surrounding the product, from selection and ordering to receiving and service. Rule 7: The business design of the future increasingly uses reconfigurable e-business community models to best meet customers needs. Rule 8: The tough task for management is to align business strategies, processes, and applications fast, right, and all at once. Strong leadership is imperative. Figure 1: The Rules of E-Business

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Technology is no longer an afterthought in formulating business strategy, but the actual cause and driver If any entity in the value chain goes cyber, companies up and down the chain must follow suit or be substituted. Currently executives are least aware of the magnitude of the affect of e-business -- lack vision E-business is about structural transformation -- revolution of the rules of business Managers must learn to see differently The ability to streamline the structure and to influence and control the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products. Core driver of structural transformation Changing the flow of information requires changing the product mix and the business ecosystem in which you compete Future shock is real -- failure to change death To thrive, companies need to be in a state of perpetual transformation constantly creating fundamental change. i.e.: 1980 Digital & IBM own PC market but Compaq, Dell & Gateway took over.

 Inability to overthrow the dominant, outdated business design often leads to business failure. E-business requires flexible business designs Outsourcing strategy necessary but insufficient, e.g.: Amazon.com against Barnes & Noble as Yahoo against Microsoft Net New business design goal is to create flexible outsourcing alliances between companies that not only off-load costs, but also make customers ecstatic. Recurring theme that firms are implement to fashion new business models: disaggregation and reaggregation-Intel with constant chip innovation is a good example Objective of reaggregation is to either lower cost or enhance differentiation (using technology) Steps to disaggregation and reaggregation challenge traditional definitions of value define value in terms of the whole customer experience

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engineer end-to-end value stream integrate, integrate and integrate create a new generation of leaders, not digital designers Challenge traditional definitions of value, continuously improve: speed - service can never be too fast convenience - integration along supply chain personalization - customize to the individual price - nothing can be too affordable Domino set the new standard in pizza delivery View the world through the customers eyes. E-Commerce is enabling companies to listen to their customers and become either The cheapest, The most familiar, or The best Best example of value - oriented format is Wal-Mart Most familiar example is McDonalds American Express exemplifies being the best Executives need to ask: Is there an Amazon.com that can squeeze my margins? If not, can I create one? Any new entrants in my market that are leveraging the WEB to rewrite the rules?

 Dont use technology just to create the product. Use technology to innovate, entertain, and enhance the entire experience surrounding the product, from selection and ordering to receiving and service. Amazon.com, example of great user - interface that bundles experience innovation and brand building. Amazon.com achieved a very high customer loyalty, 58% Amazon.com real trick is providing satisfying front-end and back-end experiences Microsoft new ventures: Expedia travel sales 5-10 million a week in less than 3 years Car Point provides auto information Microsoft Investor full service support to investor w/links to trader To create the future a company must be able to engineer the entire end-to-end value stream.

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The business design of the future increasingly uses reconfigurable e-business community models to best meet customers needs. Competition is no longer between companies, but between EBCs E-business car dealer community AUTO-BY-TEL is revolutionizing car buying Reinvented the business model for buying, selling and financing cars free to customer, dealers pay fee auto manufactures re-think the future of car dealerships How should we organize the opportunities that dont fit the current model? What skills and competencies must we build now to create the new value stream? Integrate, Integrate, Integrate Most firms dont have integrated infrastructures Customers now have more choices, they are no longer willing to tolerate inefficient services. Barriers to integration: process inefficiencies, lack of application integration, fragmented information and lack of accurate information Creating business value out of technology Fed Ex - spends 1 billion $ per year on IST Partnering with customers, i.e.: Nation Semiconductor

The tuff part of e-business is getting strategy implemented -- less than 10% of strategies are actually implemented E-business Execution Framework Provide a structure for defining, communicating and monitoring new realities redesign core business process to align with new organization vision enable IT infrastructure to support change, innovation and business goals The failure is a management problem, not a technical issue Needed a new generation of e-business leaders. The tough task for management is to align business strategies, processes and applications fast, right and all at once. Strong leadership is imperative. Leaders greatest challenge: gain deep knowledge of her/his business and decide to stay with the status quo or enter the chaos, risk and uncertainty of new products and services Recover the entrepreneurial spirit from which the company sprouted.

LECTURE NOTES - E-BUSINESS TREND SPOTTING

Introduction What are the implications of e-commerce on the form and function of the 21st century organizations? The tension between the old guard and rival upstarts is palpable Increasingly, the tussle between new and old centers on new distribution channels Differentiating between fads and trends Fads catch on quickly, spread and then die quickly Trends are global, tend to last 5 to 10 years Trend spotting has become a plan or be planned for issue

 Consumer trends Speed of service Self-service Integrated solutions, not piecemeal products Service/Process trends Convergence of sales and service: Customization and integration Ease of use: Make service consistent and reliable Flexible fulfillment and convenient service delivery: Streamline your supply chain. Organized trends Contract manufacturing: Becoming brand intensive, not capital intensive Retain the core, outsource the rest: Business process outsourcing Increasing process transparency and visibility Continuous innovation and employee retention Enterprise technology trends Enterprise applications: Connect the corporation Infrastructure convergence: Increasing melding of voice, data, and video Multichannel integration: computer telephony integration and voice recognition Wireless applications enter the mainstream Leveraging legacy investments: The rise of middleware for application integration

Figure 1 - Major Trends

Trends Increase speed of service: for the customer, time is money Why delays occur Duplicate + data entry - little integration of IS Common ailment afflicting many companies Large $ in ERP If your company doesnt make it easy for the customer to do business, someone else will Empower your customer: Self-Service Customers embracing 7/24 self-service systems Demise of intermediaries Gateway computer - design, configure, order, pay E-trade - disintermediates the broker Travel Industry - lowers cost, resolves the need for expensive physical facilities Service organizations -- customer push for self-service is dramatic Established companies at a disadvantage over new starts, they require integration of existing systems

Provide Integrated Solutions, not piecemeal products Good example: Microsoft Office Suite -- do you shop individually for word processors? Spreadsheets? Core design objective in products is seamless integration One-stop, life-path providers Wal-Mart superstore - sell more to each customer/convenience The GAP - effectively markets image/collection of products ToysRus - grows with customer/babies, kids, toys Customers want integrated - service - offering businesses that solve their one-stop shopping needs Integrated solutions make customers decision process easier. Integrate your sales and service: customization and integration The average company loses half of its customers every 5 years It costs 5 to 10 times as much to attain a new customer as it does to keep an existing one Cross selling and up selling strategies Sell while serving customers Typically sales and service viewed as separate function i.e.: Home Depot - perpetual service mode Give customers fast, accurate, consistent information Service - before, during and after the sale Customer relationships are the key to business growth

Ease of use: Make customer service consistent and reliable AT&T $0.00 bill story Has something similar happened to you? As service gets better, customers expect more & better service Single point of contact required Sharing information beyond company boundaries - key to dependence on third parties for support Requires adopting integrated applications Provide flexible fulfillment and convenient service delivery Bring service to the customer, dont wait for customer to ask Gevalias integration story Development of integrated supply chain is by far one of the most important business trends Contract Manufacturing: Become brand intensive, not capital intensive Asset intensive e-commerce virtual manufacturer Contract manufacturing roots in high-tech industry Sun Microsystems story - beat the rate! Trend toward specialization (marketing vs. manufacturing) means the company focuses on what it does best More profits from fewer assets

Learn to outsource: You cannot be good at everything Business process outsourcing (BPO) cost reductions BPO also facilitates entering and creating new markets rapidly BPO flattening the organization horizontal business processes BPO is a way to create a true virtual enterprise BPO strategies herald the beginning of a new era Increase process visibility: Destroy the black box Process visibility implies customers need access to order status, product information, pricing and availability Process visibility greater demand i.e.: United Parcel Services (UPS) tracking system-- Customers can track shipments in air, ground, water; anywhere..anytime Process visibility especially important in business to business commerce Solectron story - STARS shop-floor tracking & recording system. Customer can track products through assembly and testing Process visibility requires companies to build internal applications and processes that open the black box Allows for increased accountability Process visibility competitive edge through increased long-term customer relationships

Learn the trends in employee retention The enterprise, to succeed, must become a learning organization Nordstrom's story - how to do it Always please the customer 90% of sales come from 10% loyal customers key to success is its employees Exceptional incentives to motivate employees Employees given broad latitude and autonomy entrepreneurial zeal in the stores service Trends in employee retention Better incentives and compensation Earned advancement Better motivation Old ways of command and control over knowledge workers will not work well in the future - e-commerce

Integrated enterprise applications: Connect the corporation Integration is the key to unlocking information and making it available to any user, anywhere, anytime success Why is integration so hard? - discuss w/class subsystem optimization system suboptimization Market for Enterprise Software Applications: ERP, i.e.: SAP, Peoplesoft, BAAN, etc. represent the backbone of the modern corporation Buy versus build, build crisis of complexity, buying relief from time-tomarket pressure Differentiate between packaged application support and takeover. 2001: A Space Odyssey - HAL story Refer to Jacobs and Whybark new book: Why ERP?

Meld voice, data and video Major trend in infrastructure for e-business in the convergence of various data and voice transport networks Convergence based on internet protocol IP, packet switching layer Many minitrends occurring simultaneously: The race to improve the last mile bandwidth - biggest problem/barrier to internet usage. The race to provide quality of services - dial tone of today to the Web tone of tomorrow. The race to dominate the customer home contact point - multiple contact points at home proliferation of network appliances EnergyOne example - offers phone, security, gas, electric, etc. Telephone over the internet The infrastructure of e-commerce is in its infancy and evolving quite rapidly Multichannel Integration: Look at the Big Picture Customer expect consistent service regardless of the channel they use - web, direct dial, voice response, kiosk, etc. Multichannel service integration is a management, not a technical issue The level of technical investment required to create integrated services in huge Long term trend more work than people now realize

 Wireless applications enter the mainstream As wireless infrastructure develops a new wave of consumer and business applications will emerge First generation devices: cellphones, Palm Pilots, Nokias Communicator are gaining market share Real potential of wireless applications lie in the enterprise applications marketplace Pushing data to decision maker via wireless Middleware: Supporting the integration mandate We are becoming more customer-centric Need to integrate legacy applications of the 1970s with modern applications creating a seamless process integration To meet the integration needs middleware is emerging Middleware is the glue between the applications - mainframe and Internet 500 largest US IT user to spend $97 billion on IT products and services this year. Middleware prolongs the life of existing systems there by generating costsavings Middleware trend plays an integral role in creating customer-centric, distributed and virtual organizations

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What is common to all these trends? Effectiveness - directly affects the relationship between the enterprises customers and its environment Efficiency - affects the internal structure and operating activities of the enterprise Integration - push for one-stop shopping consolidation Paradox: companies with best resources to take advantage of new trends are often least structurally capable of taking advantage of them.

LECTURE NOTES - THINK E-BUSINESS DESIGN, NOT JUST TECHNOLOGY Introduction Today strategist need to get it right the first time in cost, time to market, and quality What sets the truly great organizations apart is their ability to use the state-of-the-art technology to transform themselves. They do three things well: Redefine value for their customers Build powerful e-business designs that out perform the competition Understand customer priorities and constantly raise customer expectations to new heights Todays focus is business design not process design Business designs are strategic weapons in the digital economy Business design is at the core of corporate strategy Questions to be answered before creating innovative business designs: What business designs make your customers experiences unique and memorable? Does your design meet your customers priorities - now? In the future? What competencies and capabilities do you need to create rich experiences for customers? How much do you manufacture? - outsource? Are your structures processor or function oriented? How do you tailor legacy infrastructure to meet new requirements?

Page 2 The First Step in E-Business Design: Self-Diagnosis Ask yourself these questions: Has a recent wave of technology created new ways of doing business? Is your company responding to changing customer expectations? Is your company willing to question and change industry assumptions? Can you succeed in lowering operating costs while becoming more flexible and adaptive? If all your answers were yes You are an innovator or market leader If most of our answers were yes You are an early adapter or visionary If most of your answers were no you are a new member of the silent majority You are either a pragmatist, old-guard conservative, or die-hard skeptic

The Second Step: Reversing the Value Chain

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Greatest challenge is linking emerging technology to new business design success depends on creating new product offerings in which the customer sees value Today companies dont just add value, they invent it. Business design is an outside - in approach the strategy revolves around the customer Reversing the value chain - see Figure 3.1 Becomes critical in times of structural transitions, when old categories become obsolete E-business design is inextricably linked to the management of change The Third Step: Choosing a Narrow Focus (Pick one) Service Excellence - delivering what customers want with hassle-free service and superior value Operating principles of service excellence: Prepare your company for the unforeseen Gather and maintain all the up-to-date, accurate information you need, where you need it and when you need it Employ customer contact management Develop a forward thinking customer service philosophy

Page 4 The Third Step: Choosing a Narrow Focus (Pick one) - Continued Operational Excellence - delivering high quality products quickly, error-free, and for a reasonable price. Principles for success in operational excellence: Efficient leveraging of assets Management of efficient transactions Management of sales intelligence Dedication to measurement systems Management of customer expectations Continuous innovation excellence - delivering products and services that push performance boundaries and delight customers Continuous innovation is based on the following principles: Risk-oriented management style Growth by merger and acquisitions A market-education style Encouraging innovation

Page 5 Case Studies - Discuss Each in Class Service Excellence at American Express Regularly betting the company on innovative products and services AMEX business over view Service strategy leads the way Lessons learned: In financial services, technology is not a luxury, it is absolutely mandatory Operational Excellence at Dell Computer Michael dell starts early - grossing 80K $ per month from his dorm room in 1984 Company over view Build-to-order e-business design Superb low-cost manufacturing and fast product development End-to-end operational excellence Flexible and agile supply chain (discuss) Lessons learned: Make the internals of the company agile enough to respond to the everchanging and ever-increasing needs of customers Requires a supply chain excellent in anticipating and responding to change

Page 6 Case Studies - Discuss Each in Class - continued Continuous Innovation at Cisco Systems Cisco believes that continuous innovation demands that: Organizations build on change - not stability Organize around networks - not hierarchy Based on interdependence with partners constructed on technological advantage - not bricks and mortar Company over view Exponential Growth: Playing the acquisition game 30 acquisitions in five years Continuous Innovation via acquisitions Strategic level - quick fix Tactical level - new product line adds revenue Lessons learned: The challenge is to manage a loosely coupled structure while continuing to provide seamless product integration to the customer

Page 7 Case Studies - Discuss Each in Class - continued Business Design Lessons Learned Technology is the only common thread in all cases Be customer focused Most difficult, more perilous, most vital Value creation is a continuous process Transform business processes into digital form Digital information is more efficient to create and maintain Decentralize management but with centralized coordination Create an e-business application architecture to address three critical requirements: Interface - with suppliers and customers Integration - of business process using IST Innovation - new advanced applications Integrate, but plan for continuous growth and change Nothing is permanent

LECTURE NOTES - CONSTRUCTING THE E-BUSINESS ARCHITECTURE

Introduction You must bridge the information chasm: [reference: Notes on Designing the New Digital Enterprise under Blueprint to the Digital Economy] Modern business designs are built from enterprise applications - these apps are the backbone of the e-business enterprise Creating large scale apps is not easy - ? too quick: may answer the wrong question Senior management must play the role of corporate architects Key questions senior management must ask: What are the key trends that will drive e-business apps? What is the role of packaged apps software? Role of technology changes in decisions on app deployment? What is the ideal e-business application architecture? What integrated architecture will radically improve corp. performance? What management structure will harness and exploit business apps?

Page 2 Why is application Integration Important Many reasons to force integration, among the most important: New customer - Care Objectives Rapid, error free fulfillment will increasingly play a major role in retaining customer loyalty Amazon.com has integrated their Web sites with their back office systems inventory management, order processing, financials, customer services, etc. How to integrate apps for seamless flow of information that e-business designs demand. New competitive conditions require Integrated apps to Survive Changing competitive environment is driving the need for integrated apps Integrating internal apps is just a down payment on a competitive advantage NB Power Case - use of SAP [reference: Why ERP] Fast Moving competitors force the need for app. integration NORWEST MORTGAGE CASE Traditional non-automated industry caught in e-business transaction 2,000,000 customers, 1 of 15 mortgages in US Strategy - to enable customer convenience Access to any information, in any form, anytime, anywhere Acquisition to get flexible scaleable e-business architecture

 Bad for your health: problems caused by lack of integration Page 3 Oxford healths computer problem overstated revenue understated expenses stock fell 80% Organizational barriers to getting integration right: Focusing too much on efficiency and cost-cutting too narrow a view Not listening to customers perspective Rehashing competitors ideas best practice may not be best for you Pursuing drawn-out enterprise projects - search for perfect solution Frequent reorganization=> weak executive involvement and success Relying too much on outside consultants for execution New Era of Cross-Functional Integrated Apps-Application Clusters Stages of Evolution of Business Apps Stage One - Simplification and Segmentation fragmented processes while improving productivity Stage Two - Reintegration and Transformation i.e. order entry transformed into sales apps business process reengineering focuses on cross-functional business processes. Shifts from task-oriented to process-oriented organizations=> discontinuous Trend toward software-enabled process support Stage Three - Cross Functional Integration an Fluid Adaptability Application clusters are designed to integrate an array of internal functions (i.e. BAAN, SAP, J.D. EDWARDS, Siebel, etc.)

Page 4 New Era of Cross-Functional Integrated Apps-Application Clusters - Continued Charles Schwab: Customer Relationships Management Apps Customer service is the core of Schwabs strategy Siebels Sales Enterprise system purchased=> CRM functionality Allowed Schwabs sales reps. to understand the customers and the companys relationship with them - all 3.5 million Integrated CRM apps provide immediate value Large, rich companies are purchasing and implementing packaged apps over custom-built solutions Nestle: Enterprise Resource Planning Apps 210,000 employees, 498 factories, operating in 69 countries Challenge: how to integrate systems and business activities while gaining high quality, consistent management of information SAPs ERP application suite purchased to run order entry, purchasing, invoicing and inventory control. Shift from stock-oriented to demand-driven production.

Page 5 New Era of Cross-Functional integrated Apps-Application clusters - Continued Ford Motor Company: Supply Chain Apps (Visteon Division) balancing production capacity with market demand - biggest challenge SCM application chosen to meet the challenge In todays customer-driven environments companys must streamline their inter-company processes as well as in house operations. Result is enormous payoff for all participants in the supply chain. Whirlpool: Selling - Chain Management Second largest producer of major home appliances in the world To reduce operating costs streamline the sales process Bought an enterprise software suite to integrate sales functions S-C Management Apps are a cross-functional application cluster CIBC: Operating Resource Management Systems ORM Systems are a new class of procurement-oriented apps Canadian Imperial Bank of Commerce (CIBC) secured ORM Potential savings from ORM is very high, because 95% of the procurement process was paper-based. POs Cost from 70 - 300 $ each (average $100+) ORMs are employee self-service apps

Page 6 New Era of Cross-Functional integrated Apps-Application clusters - Continued Bay Networks: Enterprise Application Integration Apps BN built a custom interface between their Customer relationship management app and ERP from SAP Interface processed 10,000 new delivery records per day This interface (EAI) - a connector app unite front office customer relations mgmt with back office operation apps. EAI apps are necessary with multi-vendor environments Cross World Software is one vendor providing EAI apps. Business Analytic, Knowledge Management, and Decision Support Apps Objective of these apps is to turn the enormous amount of data available into knowledge companies can use Need to get business intelligence from increased electronic data capture Market for these apps is expected to grow substantially These apps are the first time we are seeing the integration of data capture, analysis delivery into comprehensive solutions

Page 7 Integrating App. Clusters into an E-Business Architecture Enterprise Business apps are fundamentally process systems No single vendor can provide every need, hence customers purchase multiple apps from multiple vendors customers have to integrate different business solutions. Figure 4.11 shows how various application clusters are integrated to form the future model of the 21st century org (discuss the model) Companies now run on independent application clusters. Integrating e-business apps is a journey, not a destination The Wal-Mart example is one of the best creating the e-business application architecture is a continuous process of integration, encompassing the enterprises entire operating base - apps, information, communications, and infrastructure - to support the business Creating the application architecture is a top-management job

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Figure 4.11: E-Business Application Architecture

Page 9 Integrating App. Clusters into an E-Business Architecture- Continued Aligning the e-business design with application integration Evolutionary process - described over five stages Application integration must be closely aligned with the e-business design strategy Toughest part is changing organizations to align with the technology. Stage 1: Cross Functional Business Unit Produce dependable, consistent, quality products and services at the lowest possible cost e.g.: Whirlpool, CIBC Stage 2: The Strategic Business Unit Serving the customer end-to-end Beginning to consolidate their supply chain e.g.: American Express Stage 3: The Integrated Enterprise Focus on cost-reduction and internal efficiency Goal is to be highly customer responsive, leveraging the ability to quickly deliver high quality products and services at the lowest total delivered cost e.g.: Dell Computer

Page 10 Integrating App. Clusters into an E-Business Architecture- Continued Stage 4: The Extended Enterprise Creating market value is most important Multi-enterprise supply chain with a shared information infrastructure e.g.: McKesson Stage 5: The Inter-Enterprise Community Focus is on market leadership e.g.: Microsoft Expedia and E*Trade Success depends on a flexible and forward - thinking business architecture Only with relentlessly integrated systems does a firm stand a chance of keeping up.

LECTURE NOTES - CUSTOMER RELATIONSHIP MGMT: INTEGRATING PROCESSES TO BUILD RELATIONSHIPS Introduction Facts to Know and Understand Cost is 6 times more to sell to a new customer than an existing one A typical dissatisfied customer will tell ten people about his experience Company can profits 85% by customer retention 5% Odds of selling to a new customer are 15%, to an existing customer 50% 70% of complaining customers will continue to be customers if problem is quickly resolved 90% of companies now dont have the necessary sales and service integration to support e-commerce Why Customer Relationship Management? Customers want excellent service - now! Effective management of customer relationships is a source of competitive differentiation CRM is one of the highest growth software markets To keep your best customers - create new delivery channels, capture large amounts of customers data, and tie it together to provide customers with a unique experience

Page 2 Defining Customer Relationship Management An integrated sales, marketing and service strategy Goals of business framework: use existing relationships to grow revenue use integrated information for excellent service introduce more repeatable sales processes and procedures create new value and instill loyalty implement a more proactive solution strategy CRM applications better customer relation programs maximizing the lifetime revenues New technologies and demands on customer service CRM software $153 billion in 1998, growing at 30% per year Managing Customer Life Cycle : 3 phases of CRM acquiring new customers enhancing the profitability of existing customers retaining profitable customers for life master one of the 3, it will dictate the technology infrastructure strategy Acquiring new relationships instantaneous response to customers is key probability of a sale with response in 1 to 3 minutes

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Enhancing Existing Relationships Best Buy case: call centers primary concern is customer satisfaction through effective resolution of issues and concerns Retaining Customer Relationship requires knowing and understanding your customers needs State Farm Case : pricing policy, commission policy for agents close to the customer objective

Organizing Around the Customer: The New CRM architecture Take the test - answer the questions, pp. 116 and 117 Whats new about CRM architecture? customer -centered nature of applications, not centered on marketing, sales or other internal functions measuring customer feedback drives CRM improvements CRM infrastructure is really a portfolio of process competencies

Page 4 Portfolio of CRM Process Competencies core are: cross-selling, up-selling, direct marketing and fulfillment, customer service and support, store front and field service, and retention management cross-selling and up-selling software include the capability to qualify prospects, track contacts and refer them to sales people when appropriate -- companies must sell complementary products and services to deepen their relationships with customers direct marketing and fulfillment - sell well and deliver fast. Goal of fulfillment is to provide a myriad of information to customers quickly, easily and efficiently customer service and support - collection of discrete applications (service request mgmt., account mgmt., contact and activity mgmt.,customer surveys, return material authorization, and service agreements) which must work together to ensure that customer service representative can quickly assign, create and manage service requests field service operations - the hands-on extension of external customer support, i.e. service calls retention management - spend your resources on customers who count. Differentiate customers based on account and transaction history - depends on decision support technology - depends on gathering detailed customer information

Page 5 Supporting Requirements of the Next Generation CRM Infrastructure -- requires five types of integration: 1) customer content, 2) customer contact information, 3) end-toend business processes, 4) extended enterprise or partners, and 5) front-office and back office systems Integration of Customer Content holistic view requires integration of structured and unstructured data integrated picture of customer allows for numerous service and sales opportunities Integration of Customer Contact Information opportunities for customer interaction and diverse Capturing and sharing interactions within organization is top priority channel - independent solutions are required Integration of End-To-End Business processes restructure to be solution-oriented not problem-oriented the keys are consistency and simplicity web provides organizations the opportunity to achieve end-to-end integrated sales and service environments Integration of the Extended enterprise: Interenterprise Customer Case sharing customer information with partners and third-party service organizations is absolutely critical

Page 6 Integration of Systems -- CRM requires integration of the telephony, web, and database technologies to provide a total view of customer attributes and account history. The enabling technologies that must work together are: legacy systems - requires middle-ware and messaging tools computer telephony integration (CTI) data warehousing - move from data to information decision support technology - use of analytical and modeling tools Organizational Challenges in Implementing CRM implementing CRM requires a high degree of political, cultural and organizational change resistance CRM implementation organizational issues: CRM can reduce an individual business units contribution while increasing whole company benefits -- requires new look at financial incentives CRM requires migration from silo-centric to customer centric Infrastructure - proprietary issues global organizations must deal with different languages, time zones, currencies, regulatory environments, etc. Front line must carry the customers voice deep into the organization and use it to guide processes.

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Next Generation CRM Trends - management needs to reevaluate customer contact points The rise of the call center as a powerful customer contact point one of the main growth areas in customer contact 70% of all customer contact occurs at call center Internet will soon replace telephone must eliminate lengthy hold times and call transfers managers need to plan the transaction from call centers high-touch capability to the webs low-touch capability Listening to the Customers be careful whose customers you listen to feedback from competitors customers- very important Customer Loyalty: Luke Warm or Fanatical answer the question - what have you done for me lately do your customers get polite customers service? Or are they delegated when the call is over Harley - Davidson Case

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New Integrated Service Experience telephone support the web contacts Higher Service Expectations customers dissatisfaction with service is widespread customers expectations are rising better service companies must view the world through the customers eyes to build great customer relationships New Competition Creates New Headaches companies must create value for the customer. This is the key to survival in an increasingly dynamic market new and nontraditional competitions are entering established markets, with lower cost structure and broader geographical reach and they are creative in addressing customer needs

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Building a CRM Infrastructure: A Managers Roadmap define a vision of integrated CRM - whole picture understand the customer develop a business case (use technology) evaluate current readiness (competition) establish the CRM strategy and specific objective evaluate appropriate application - focus on case of doing business take the customers view not the product or account view identify and target quick wins and then celebrate successes put the ownership of the end-to-end projects in the hands of a single manager implement in stages - be proactive about change be sure to create a closed-loop CRM environment create concrete measurement goals

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The goals of the new CRM Infrastructure create a single, long-running customer dialogue across all business functions and customer access points create an integrated approach across all functional units that enables companywide management of customer relationships ensure that all channels your customers use are easy and consistent understand customer behavior understand when to take action

LECTURE NOTES - SELLING-CHAIN MANAGEMENT: TRANSFORMING SALES INTO INTERACTIVE ORDER ACQUISITION Introduction Problems with Existing Sales Processes marketing information is not consistent - whats right ? Sales people are inundated with non-value added tasks fragmented order support is a problem after the order is placed current sales apps. are not responsive or flexible because IS staff is backed up with change requests current systems are not integrated - requires keying data Defining Selling-Chain Management an integrated order acquisition strategy from inquiry to order - the whole life-cycle SCApp are tools to streamline the integrated set of activities to acquire and fulfill orders. SCApp Framework Goals basic change is moving from fractionally oriented sales automation to process oriented selling-chain management make it easier for the customer add value for the customer

Page 2 make it easy to order customer products increase sales force effectiveness coordinate team selling Why an Integrated Selling Infrastructure increasingly sophisticated and demanding customer sales organizations must add value, operate faster, be more accurate, and cut costs -- all at the same time the order acquisition process has undergone little change and automation in most enterprises, to date Business Forces Driving the Need for Selling-Chain Management The Rise of the Self-Service Order after search customer looks for final selection process that is comfortable, convenient and least irritating example of success: Microsoft Car Point, Auto-by-Tel, etc. selling is done not by sales people but by customers themselves The Excessive Cost of Presales Technical Support delays in preparing quotes and proposals lead to lost sales technical support is effective but drives the cost of selling up and shifts the burden of expertise from sales person to technical sales specialist trend toward market of one makes use of standardized proposals difficult and complex

Page 3 The Increasing Cost of Order Errors more customization more order errors human error often accounts for order mistakes The Increasing Channel Proliferation Problem channel applications that serve order acquisition side are: field sales and in-store/branch sales - assisted in-person selling telesales - assisted call-center selling self-service - unassisted selling via the Web third party resellers or channel selling The Increasing Complexity of Products force companies to pressure sales force to improve productivity and responsiveness tight labor markets for seasoned sales professionals The Rise of Deregulation, Mergers and Acquisitions monopoly enterprises have to shift orientation not paying enough attention to customer needs during mergers is often the primary cause of company failure

Page 4 Technology Forces Driving the Need for Selling-Chain Management Reasons Why SCApps Get Mixed Reviews integration was not a factor considered in the selection and implementation of applications many of the then-current software solution were unwieldy or difficult to implement the breadth of product functionality did not meet the real business requirements sales and marketing staff refused to use the products because they didnt increase sales effectiveness The Selling-Chain Application Continuum (ref. Figure 6.2) requires a more customer-centric sales functionality today Problems with Existing Sales Force Automation first generation of SFA software introduced stand-alone, task-oriented tools ---- focused on direct sales force second generation SFA software focused on improving the administrative productivity of salespersons second generation SFA tool problems limited task-oriented functionality functional isolation organizational resistance limited view of customers

Page 5 Limited Process Functionality SCAs must automate processes across multiple user types and functional areas -- this means a significant degree of complexity in SCApps. Limited Sales Effectiveness: The Need for More Integrated Applications sales people can only be as effective as the systems in which they work to facilitate effective selling, focus is placed on ease of use, which also relates to staff retention and training Managing the Order Acquisition Process process of order acquisition entails performing needs assessment, facilitating option selection, performing configuration, generating quote, proposal, etc. map the customers entire experience with the sales order process corporations, worldwide use turning to OA systems to gain and use more intimate knowledge about their customers in the order acquisition process Cisco System and Selling-Chain Management Began in 1966 Cisco began the process Phased plan on how to establish leadership in e-business phase one - Info. Center - one way information phase two - Marketplace and Internetworking product Center phase three - (currently in process) Customer Fulfillment phase four - (planned) Relationship Mgmt -e-business strategy

Page 6 Inter-enterprise Order Acquisition: Cisco Connection Online to serve business-to-business commerce - start 6/96 Web sales at $6 billion in late 1998 with electronic order entry Cisco reduced lead time by 3 days and better, personalized service and support Elements of Selling-Chain Infrastructure first, isolated apps. developed for key aspects of OA process Product Catalogs and marketing Encyclopedia: for assisted selling -marketing encyclopedia and intelligent electronic catalog connects sales representative and customer to most current product and service information Sales Configuration Systems: identifying mis-configured orders early is critical to reducing rework costs and customer returns Pricing Maintenance, Distribution and Configuration: selling complex products requires effective pricing strategy support Proposal and Quote Generation: such as -- opportunity creation/tracking, interactive needs assessment, automatic quote generation, proposal wizard Sales Incentives and Commission Processing: potential levers for increasing sales effectiveness because the realm of compensation design, planning and processing is one of the most complex, error-prone, and time consuming areas for todays executive

Page 7 The Customer Foot: Transforming, Shoe Sales with Technology: Custom Foot Case attempted to completely reengineer the sales process using technology customers could have shoes made to their specifications in about 3 weeks, starting at $100.00 how did it work customer stands on infrared scanner to measure feet size customer sits at kiosk to select options - shoes are dynamically depicted as the specifies options order sent to factory 3 weeks later shoes arrived at customer location 6/1/1998 Custom Foot filed bankruptcy The Problems: conflict between size and fit misjudging the importance of subjectivity in shoe fitting - loose, tight, whats right forecasting demand for various leather was very difficult the flow of precise order information from customers to company dealing with customized production services is critical to success

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Biggest Challenge for Managers Who Want to Implement Selling-Chain Apps. are: How to keep up with all the changes in vendors, applications, technologies, pricing and tools How to sort through vendors and software to select the best fit How to ensure a successful implementation and development

LECTURE NOTES - ENTERPRISE RESOURCE PLANNING: THE E-BUSINESS BACKBONE Introduction 70% of Fortune 1000 Companies have begun work on ERP Lending vendors: SAP, ORACLE, PEOPLESOFT, J.D. EDWARDS, and BAAN Top management now realize that outmoded systems must be fixed - fast ERP is the backbone of e-business Who really uses ERP suites? 3Com Corporation Chevron Products Company General Motors Effective Service Delivery Requires Integrated Back-Office Applications Ericsson Case sales order processing lead time from 1 hour to 10 minutes purchase order lead time from 2 hours to 5 minutes production scheduling run time from 18 hours to 30 minutes to 98% on time order delivery

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Why is Management Willingly paying Millions for ERP Suites? The need to create a framework to improve customer order processing The need to consolidate and unify business functions The need to integrate a broad range of disparate technologies The need to create a new foundation for next-generation apps Y2K issues boosted ERP adoption The Second Wave: e-commerce drives ERP demand the following drivers vary with intensity across different industries, but their combined impact is causing managers to reevaluate application capabilities: replacing creaky legacy systems gaining greater control managing global operations handling industry deregulation and regularity change improving integration of decisions across the enterprise

Page 3 ERP Decision = Enterprise Architecture Planning Ask the right question: What kind of company do we want to be? Not What features are in each application Fox Meyer Drugs Case ERP implementitius bankruptcy IT Dept. runs the show less than optimal results ERP impact not just software ERP adoption significantly affects organizational architecture, processes, people and procedures ask the right questions: What is our business?, What are our issues today?, What will be important tomorrow? ERP Decision: Build or Buy Software favors purchasing commercial of the shelf COTS software from third party vendors COTS solution initial total costs Highest costs from: consulting and programming resources associated with implementation and maintenance The Capabilities of COTS ERP Solutions consolidation of the back office creation of a single back office that supports multiple channels facilitation of changes in business practices facilitation of changes in technology

Page 4 The COTS ERP That Keeps on Ticking: The SAP Juggernaut after Microsoft, SAP is second-largest software developer in terms of market capitalization founded in 1972 by five ex-IBMers R3 product launch in 1992 expediential growth multilingual/multinational design global acceptance Top software vendor in Germany SAP has strong lead in market a $50 - 60 billion consulting ecosystem grew around the product R3 is a technical tour de force change one module all modules changed looks like SAP/R3 will continue to dominate ERP usage in the Real World Microsoft -- an incredible success story spent $25 million and ten months installing SAP/R3 to replace 33 financial systems in 26 subsidiaries in 1995 failed to implement ERP solution in 1992 & 1993 required close coordination and extensive preparation

Page 5 Owens - Corning goals of new sales order management system: accepting orders from any location worldwide into one system assigning ship dates to available products scheduling future ship dates to products (not in stock) checking order statures 7/24 integrating these islands of information est. savings of $65 million by end of 1998 Colgate-Palmolive: The ERP benefits are Tangible 70% of total revenue from foreign sales goal to achieve the ability to coordinate globally and act locally installed SAP in US division by end 1996 now installed in 35% of all operations all divisions to be installed by 2001 benefits include: from 75 data centers to 2 (w/40 people) order acquisition and processing from 6 days to 4 hours on-time delivery from 91.5% to 97.5% domestic inventories by 1/3 function consolidation 8 : 1 & 3 : 1

Page 6 ERP Implementation: Catching the Bull by the Horns Each ERP application suite is different never approach the installation of ERP packages in the same manner variety of application implementation strategies (discuss) how to do it wrong: Brother Industries Ltd. Roadmap to Rapid Implementations: The accelerated ERP approach automation without simplification only immortalizes ineffective processes SAPs ASAP methodology (works) phases: project preparation blueprint pilot final assessment ASAP risks, consistency quick results implementation is just the beginning Roadmap to New Leadership Skills: effective coordination management encompasses a combination of capabilities: strategic thinking - how well does your ERP selection, implementation and evolution strategy align with your business strategy process reengineering - you can NOT implement large-scale systems without first changing processes

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managing implementation complexity - requires partnership governing -tie compensation to deliverables transition management - overcoming resistance to change -- vendors and consultants cant do it all The Future of ERP Applications - The critical elements required to achieve flexibility Components, not modules - need apps, that can be pulled apart, recombined and distributed to match new out-sourced business models Incremental migration, rather than excessive reengineering - cut implementation time dynamic, rather than static, configuration of ERP systems -- achieve the ability to create dynamic suites of apps out of the best-of-breed components management of multiple strategic sourcing and partnership relationships must monitor and model processes affecting the activity of the business

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Next Generation: ERP is Evolving into Supply Chain Planning (SCP) similar to MRP MRP II ~ ERP ERP asks Can I Take your order? SCP asks Should I Take your order? SCP systems have emerged as a component to ERP systems to provide intelligent decision - support capabilities supply chain execution and selling chain management must back up SCP ERP Application Management and Maintenance is Big Business must have tools and methodologies that aid implementation and configuration of apps to meet performance specifications required requires a variety of management tools -- the primary categories are: service management i.e. Lumanate, Envive use management, i.e. IBMs Maestro systems administration, i.e. IBMs Tivoli, CAs Unicenter and HPs Open View Effective App Management means making sure response time, uptime, and transaction volume are as fine-tuned as possible.

LECTURE NOTES - SUPPLY CHAIN MANAGEMENT: INTER-ENTERPRISE FUSION

Introduction SCM isnt a technology issue its a business strategy issue that creates new, interesting opportunities Recent development at some corporations illustrate the impact of internet - enabled SCM on modern business Bargen Brunswig - managing information Dell Computer - frictionless information flow Proctor & Gamble - manufacturers and suppliers linked Bowing Aircraft - problems with production Nabisco - SCM not integrated SCM responds to delivering what the customer wants, when and where its wanted, at the lowest possible cost The next opportunity lies in fusing each companies internal systems to those of its suppliers, partners and customers SCM now on the minds of senior management

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Defining Supply Chain Management (SCM) the process umbrella under which products are created and delivered to customers the coordination of material, information, and financial flows between and among all participating enterprises new generation of SCMs optimize cost, service, quality and time factors customer satisfaction an e-supply chain in action: Warner - Lambert & CVS the Listerine product story scan one - make one objective Supply Chain Investment Trends worldwide dispersion of manufacturing and distribution facilities channel unpredictability is the norm responsiveness over efficiency companies accept lower margins to maintain and increase market share

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Basics of Internet-Enabled SCM: e-Supply Chain 101 SCM Requires Inter-enterprise Integration requires compromises for overall optimization manufacturers maximize profits by longer production lead times, but retail stores and distributors maximize profits by inventory turns Types of Inter-Enterprise Integration Responsive SC - available-to-promise (ATM) factor Enterprising SC - rapid reconfiguration of SC Intelligent SC - restructuring the SC to strengthen weak links Inferior Integration affects corporate performance - symptoms include: erratic levels of customer service no vision of future demand too many changeovers in production too many stock outs

Page 4 Basics of Internet-Enabled SCM: e-Supply Chain 201 SCM is a business framework composed of multiple application in two camps: planning process - focuses on demand forecasting, inventory simulation, distribution, transportation, and manufacturing planning and scheduling execution processing - addresses procurement, manufacturing and distribution of products throughout the value chain Elements of SC Planning: Categories of SCP modules: order commitment - available-to-promise systems advanced scheduling and manufacturing planning demand planning distribution planning transportation planning Elements of SC Execution: order planning - bridges the gap between planning and execution, includes fulfillment planning production - includes timing of final assembly replenishment - to minimize inventories revenue distribution or revenue logistics - to minimize customer returns and obsolescence

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E-Supply Chain Fusion: E-Supply chain 301 -- creating an integrated SC structure & integrate from existing SC models to more effective integrated models Diagnosing Root Causes of SC Problems - requires identifying and untangling underlying troubles, such as: luck of knowledge about end-to-end demand planning function inconsistent or out-of-date data, due to a lack of integration with ERP a lack of process integration across partners lack of necessary structural changes - eliminate the host-centric systems E-Supply Chain Heal Thyself: Fixing the Root Cause - Supply Chain fusion goes through four stages: enable information sharing - a solid communication process create joint performance measurement systems and collaborative planning processes exchange responsibilities and realign work redesign products and processes so that work becomes easier and more effecient

Page 6 E-Supply Chain Fusion Management Issue - The Four Fundamental Questions: What is the Right SC Structure for my Company? consider the nature of demand for your products: functional products require efficient processes, innovative products require responsive processes the objective of any SC design is to please the customer and make money Does the SC Enable Effective Differentiation Capabilities? Companies have the opportunity to differentiate themselves through their supply chains most companies have multiple supply chains differentiated policies = matching of performance standards to the cost and cycle time of different products Does my SC Facilitate Effective Order Fulfillment Capabilities? order fulfillment is the highest single cost of doing business and therefore offers the greatest opportunity to reduce costs and improve service Does My Company have the Right Infrastructure Capabilities? Creating a real-time SCM infrastructure is a difficult and ongoing issue - not easy! SCM apps constantly and rapidly evolving changing the realm of what is possible SCM app market expected to explode in the coming decade

Page 7 The Future: e-Supply Chain in 200X Integrated Make to Stock - traditional Continuous Replenishment - ECR & QR Build to Order - to attain maximum flexibility Integrated Make to Stock: STARBUCKS integrated supply and demand end-to-end integration 60% sales growth for eight consecutive years 4 million customers each week SC supports three channels: specialty, direct response and retail or joint ventures SCM objective is asset profitability Continuous Replenishment:The CVS Pharmacy - Mc Kesson Demand Chain CVS is leading drug retail chain Mc Kesson is leading U. S. distributor of pharmaceuticals, health care products and medical/surgical supplies w/1,6 million orderlines per day Mc Kesson heavy EDI user - 80% of goods purchased Mc Kessons wholesale drug distribution network is the most cost effective means for pharmaceutical manufactures to go to market CVS/Mc Kesson cooperate closely, share CS info in an integrated environment cost effective high customer satisfaction

Page 8 Build to Order: Intel, Solution and Ingram Micro Ingram Micro and Solution combined the is core strength: logistics and order management and efficient high-volume manufacturing build-to-order assembly services for PCs, servers and peripherals match supply with demand in real time from order placement to product with customer in seven days the enemy of efficient SC is excess inventory Ingram - Solution reseller inter-enterprise SC improves management and customer service Supply Chain Management: A Managers Roadmap -- The Eight Steps critical to turning tomorrows promise into todays realty: Clarify your supply chain goals Conduct a SC readiness audit a company - specific roadmap for SC development Develop a business case Establish a supply chain coordination unit - hard hitting but thinly staffed Begin supplier integration -- partners are needed to support the new virtual organization Develop performance scorecard Educate, Educate, Educate - employees, vendors and other SC members Learn to manage failure -- management must become adapt at identifying brush fires before they become full-fledged or youre in trouble if youre behind schedule, over budget, or everyone is pointing fingers

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SUMMARY

Supply Chain excellence requires effective strategies, sustained management commitment and changes in attitude, culture and organization Trends in technology, globalization of the economy, acceleration of outsourcing, standardization of enterprise apps, and the success of companies adopting SCM cause major changes to occur in the underlying structure of traditional technology supply chains

sales are becoming customer driven consolidation in acceleration within each segment of the technology supply chain number of suppliers with which to partner on Companies are broadening the range of services they offer, perhaps with similar services offered at different points in the SC

LECTURE NOTES: E-PROCUREMENT: THE NEXT WAVE OF COST REDUCTION INTRODUCTION LARGE Companies spend 5 - 10% of revenue on non-production goods - a $500 billion a year market Procurement inefficiencies are very high non-productive goods account for over 1/3 of corporate expenditures 95% of non-productive goods are acquired using paper-based processes STRUCTURAL TRANSITION: From Isolated Purchasing to Real Time Process Integration Corporate purchasing is undergoing a structural transition You say Purchasing and I say Procurement purchasing refers to actual buying of materials procurement is broader -- it includes purchasing, transportation, wearhousing and inbound receiving procurement is migrating from traditional paper-based processes to eprocurement Managers need a detailed understanding of how the next generation of eprocurement apps are being developed

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WHY IS PROCUREMENT A TOP-MANAGEMENT ISSUE? Procurement is evolving from a support function to a weapon in a corporations competitive arsenal Goal of automation is to free professional buyers to focus their attention on more strategic issues Five biggest challenges faced by CPOs today are: reducing order processing costs and cycle times providing enterprise-wide access to corporate procurement capabilities empowering desktop requisitioning through self-service achieving integration with key back office systems elevating procurement to a position of strategic importance within the organization Operational cost management is a central objective of e-procurement

Page 3 WHY EXACTLY IS OPERATING RESOURCE PROCUREMENT? There are two types of corporate procurement production related goods - raw materials, components, etc. non-production related goods - office and computer supplies, etc. Types of Non-production or Operating Resource Products procurement of nonproductive goods is called Operating Resource Management (ORM) basic types of operating resources: general and administrative corporate-related capital equipment maintenance, repairs and operations (MRO) travel services and entertainment highly fragmented market: 50 largest distributors have 15% market share Operating Resource Procurement Process: Controlled Chaos operating resource procurements bad practices include: inefficient buying, redundant processes, non-strategic sourcing and maverick buying cost of purchase in a paper-based system is $70 - $300 per day How Big is the Operating Resource Market? Americas top 2000 corporation spend $400 billion on nonproductive goods each year

Page 4 OPERATING RESOURCE PROCUREMENT AT MICROSOFT Summer 1996 implemented a new tool - MS MARKET: an online ordering system working on Microsofts intranet In its first year of operation MS Market was used to purchase $1 billion in supplies by 6000 employees MS Market cost Microsoft $1.1 million MS Market used primarily (70%) for high-volume, low value transactions Ms Markets use has grown steadily - today it exceeds $3 billion annually PROCUREMENT BUSINESS PROBLEM: Lack of Process Integration Need for an integrated solution - e-procurement chain management is evident Big challenge is structured migration A successful system must be designed for causal use by untrained employees Guidelines for evaluating integration alternatives management control by purchasing managers online product selection - online catalogues electronic ordering - seamless transition from requisition to purchase order application integration w/ existing systems information and reporting - for supplier negotiation and reconciliation

Page 5 Next Generation Integrated Procurement Applications Three basic categories of e-procurement apps: buy-side desktop requisitioning buy-side centralized procurement sell-side applications See table 9.5 for comparisons Elements of Buy-Side e-Procurement Solutions a buy-side app is seamless and integrated the entire procurement process and resides on an intranet a good buy-side application: automates selection and purchase of goods from the desktop cuts the administrative overhead integrates the sourcing, ordering and payment processes electronically sends and receives the full range of requisition documents from buyers accurately and quickly reports on purchasing activities controls the number of preferred customers

Page 6 The buy-side Requisitioning Process secure personal log-in Gauze authorized supplier catalogs real-time requisition / order creation requisition / order submission purchase controls / rules workflow and approval routing order dispatch and fulfillment order status tracking Ariba Technologies: Spotting a Buy-Side Opportunity first to market an operating resource management system (ORMS) not cheap - aribas ORMS costs millions ORMS focuses on customers needs ORMS being challenged by ERPs like SAP Buy-Side Requisitioning Integration Issues employee connectivity w/ powerful interface back-end systems connectivity w/ ERP supplier connectivity - streamline and automate

 Buy-Side Applications for the Procurement Professional Page 7 The key to successfully achieving procurement effectiveness is the application of spending analysis and planning across the entire spectrum of procurement Spending Analysis and Planning Functions: data collection multidimensional analysis (OLAP) supplier management decisions configuration of spending controls continuous feedback to refine controls Elements of Sell-Side e-Procurement Solutions Moving beyond business-to-supplier model toward trading communication vertical portals / hubs for communication in specific markets Three factors must be addressed to ensure success with this new model: supplies integration into extranet supplier content - rigorously maintained customer internal rollout - scaleable Maintenance wear-house, a Home Depot subsidiary supplies for repair and replacement products for multi-housing, lodging and commercial properties Vertical Procurement Portals (info mediaries or hubs) a sell-side destination site i.e.: Chemdex.com & SciQuest.com vertical procurement portals are a growing and important trend

Page 8 The e-Procurement Managers Roadmap CPOs are looking to deliver maximum business inspect at the lowest possible cost CPOs business objectives: leverage enterprise-wide buying power quick results, low risk supplier rationalization cost reduction by automating best practices in strategic procurement Systematic Roadmap to e-Procurement Step1: Clarify Your e-Procurement Chain Goals Set Specific Goals, Typical Goals are: automating the selection and purchase of goods cutting costs significantly throughout the organization quickly and accurately reporting company-wide purchasing patterns eliminating purchasing by unauthorized employees Step2: Construct a Procurement Process Audit its important to understand the current procurement process and the global factors that affect, impede, and interact with it a procurement chain audit will ensure an accurate big-picture model allows dealing with key areas that must be studied, i.e.: are current processes consistent with the organizations strategic goals and objectives do the procurement chain processes meet customers needs do the current procurement chain processes promote efficiency

Step 3: Create a Business Case for e-Procurement Page 9 ROA = (Revenue - Expenses) / Assets implementing an e-procurement solution should yield a 5% savings in separating resource costs saving should exist within and beyond the organization Step 4: Develop a Supplier Integration Matrix (SIM) a SIM helps determine the best type relationship to have with individual vendors a SIM allows clarifying supplier in 4 categories: 1. strategic-collaborative (unique products) 2. strategic-cooperative (strategic products) 3. non-strategic-limited (limited in supply products) 4.non-strategic-commodity (plentiful products) Step5: Select an e-Procurement Application - Key Considerations: Will it support my procurement process? Does it leverage my other application investments? Will it work seamlessly with other applications? Is it extendable / scaleable? Step 6: Integration is Everything DO NOT take an exclusive buy-side or sell-side viewpoint Step7: Educate, Educate, Educate Large amounts of staff time, mental energy, and dollars are devoted to working the software, and relatively little time is devoted to people frustration, sub par results, and large expenditures with little paycheck Senior management must listen, communicate, sell and fire to make it happen

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CONCLUSION To improve procurement companies must: focusing purchasing on strategic, value-added upstream portions of the business rather than transactional downstream activities increasing purchasing role in companies total spending, including such nontraditional areas as operating resource procurement centralizing procurement activities to concentrate the total spending and improve negotiating power The savings gained from procurement automation drop directly to the bottom line to deliver a substantial boast in profitability

LECTURE NOTES - Knowledge - Tone Applications: The Next Generation of Decision Support Systems INTRODUCTION Focus is on personalized decision support, modeling, information retrieval, data warehousing, what-if scenarios and reporting About the business applications Switch from the query-and-respond paradigm to the knowledge - tone paradigm Knowledge Apps: Why they are Important They free-up the data assets making them available to large audiences They must be able to collect, organize, access and analyze large amounts of data fast Flatter organizations with few middle managers employees must spend less time compiling data and more time analyzing it. Employees expect high quality info., 7/24 access, and very fast performance. Management expects a ROI on data warehouses and other technology investments The Web browser is the de facto interface for knowledge apps.

Page 2 Knowledge Tone is an Application Framework Knowledge tone is not a product or a capability, its a framework of a fully evolved knowledge economy Knowledge tone is the business of information sorting, extraction, packaging, and dissemination The Rise of Knowledge Tone: Anytime, Anywhere & Any place DSS In a variety of areas: retail, banking and finance, telecommunications and healthcare The Second Wave: e-Commerce - Driven Decision Support Uses e-commerce technology to open the world of data warehousing to consumer devices. Emerging Classes of Knowledge - Tone Applications Customer Relationship Management DSS tools for mining customer data outcomes: improved pricing, greater market share, longer customer retention or new revenue streams BC Telecom Case: implemented a customer optimization services personalization - the trend of e-commerce to push more real-time relationship management

Page 3 Personalization apps allow the following give each customer a personalized Web page display only the info. You want this customer to see automatically and positively notify customers of product improvements, promotions, etc. tailor info. According to each customers individual preferences deliver info based on products the customer owns Supply Chain DSS encourage training partners to improve profits by managing inventories in the supply chain business objective: to give one another preferential treatment in exchange for detailed ordering and inventory info. That provides greater certainty and visibility up and down the supply chain. Lexmark Case: RMS app Remote Performance Monitoring performance monitoring is the process that bridges operations and strategy an effective monitoring system is the best way to translate strategy into action BT Case: using SAPs Strategic Enterprise Management apps. (SEM)

Page 4 Business Simulation: Interactive What-If Scenario Analysis what-if analysis provides managers with timely information for decision making what-if apps encompasses advanced simulation and scenario modeling Innovation or Knowledge Management Intraspect Case - Group Memory Intraspect ROI by improving organization learning highly hyped KM caused backlash, because: few can define it software vendors are distancing themselves from it costly KM efforts are not delivering expected ROI Knowledge Tone Usage in the Real World K-T in telecommunications: contributing customer churn Churn factor: corporate promotions customer switching new promotions more customer switching 360 Communications Case - uses data warehousing to analyze customer and consumer behavior costs $500 for wireless and $300 for wireline carrier to acquire a new customer, but $50/year to retain a customer

Page 5 K-T in Retail: Sears SPRS Application Sears is the largest department store & 3rd largest retailer facing new competition executives decided on a single data source for performance indicators. Strategic Performance Reporting System (SPRS) today managers using SPRS monitor the precise impact of advertising, weather, etc. on sales enables a customized local perspective K-T in Health Care: Employee Benefit Management HR Departments moving toward self-service, K-T apps. Lots of choices + poor employee information poor employee decisions on health care options $200 billion per year spent on administrative expense solution - integrate disparate parties into a seamless network - over the Web with self-service architecture employees can perform managed care functions historical tracking eligibility checks, referrals, authorization, etc. claims submission, info. access, reporting, etc.

Page 6 Teck Trends Driving K-T Framework Investments Increased electronic capture of transactional data New publish and subscribe models - a brokered approach to program to program communication Improved RDBMS software Improved price and performance of computing and storage hardware Improved infrastructure of the Web Final analysis is whether the cost of implementation of Web-based apps can be offset by the benefits Elements of the K-T Architectural Framework K-T architecture is based on a three layer platform: e-business decision support solutions enabling technologies - data mining, query processing, and result distribution infrastructure core technologies - data warehouses and data marts Core Technologies - Data Warehousing Business Rationale goal is to simplify integration issues by having a one-stop source for enterprise data

Page 7 objective of data warehouse is to help users identify trends, find answers to business questions, and derive meaning from historical and operational data How it works takes production data scrubs it up, organizes it, and places it appropriately for browsing, analyzing and decision making Data Warehouse Components transactional apps storable source data data extraction and transformation tools data scrubbing tools data migration tools data repository tools to maintain metadata data access tools Enabling Technologies: Online Analytical Processing OLAP solutions provide a means to analyze complex data along an intuitive set of business rules OLAP solutions provide complex computational capabilities - time series analysis, drill-down interactive analysis, etc. Defining the OLAP Technology evolving to desktop, relational, multi-dimensional and hybrid OLAPS

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A Roadmap to K-T Framework 1. Identify the goals of the knowledge - tone project 2. Determine where knowledge resides in the company 3. Determine what information the company needs to capture - learn what you need to know 4. Collect, Clean and Prepare Data - may require as much as 70% of the total effort. 5. Balance inward and outward data -- internal via, external origins 6. Develop new approaches to categorizing information -- help coming new startups 7. Learn how to mine data 8. Validate the model using an independent data set 9. Deploy the model - use it! 10. Monitor the model - change with changes in the environment 11. Measure the ROI of the knowledge tone - quantification will be difficult Remember, the knowledge discovery process is interactive.

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Conclusion Interconnections are facilitating the rollout of knowledge-tone application in 3 phases Phase I: Corporate Intranets Phase II: Extranets Phase III: commercial Internet applications Today must corporate strategies in Phase I

LECTURE NOTES - Developing the E-Business Design OfficeMax Case High volume, deep discount office products superstore 780 stores, 8000 office products, operating in 330 markets CopyMax & FurnitureMax - store within a store concept OfficeMax online launched in 1995 - 1st of kind online with call centers and next day delivery from 17 centers The Challenges of E-Business Strategy Creation Based on future assumptions about everything - customers, technology, competition, core competencies, etc. Either top down or bottom up (tends to be short term) Top down analytic planning data rich, numbers driven and analytically based biggest problem is separation of strategy formulation (analysis) and implementation (execution) problems that occur (too frequently) the never-seen-again strategic plan the no-goals strategic plan the no-feedback strategic plan (must be dynamic)

Page 2 Bottom-up, just do it planning insights of those on the front line are increasingly important reaction to immediate needs gains importance need a plan to integrate these initiatives/projects. Continuous planning with feedback - built on four steps knowledge building and capability evaluation e-business design - focused on customer e-business blueprint - create a link between the e-business design, business goals and the technology foundation application development and deployment feedback is the key element in this process trigger point planning (reactive stance) - a means to an end Roadmap to Moving Your company into E-Business Getting started on the journey - two key elements the business strategy formulation application framework strategy The phases for e-business strategy formulation: knowledge building capacity evaluation e-business design

 The phases for application framework strategy: blueprint design business case creation blueprint execution Throw out traditional methods and acquire new skills

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Phase I: Knowledge Building Strategy must be based on fact, not opinion about: the customers customer value and relationship trends technology trends supply chain trends competition and predicted moves Begin intelligence gathering outside-in not inside-out Who are my customers? - categorize them (Schwab) life-goal planner serious investors hyperactive trader one-stop shopper How are my customers priorities shifting? - listen to your customers and write down what they say how has customer changed in past five years, and how do you think the customer will change in the next five years.

Page 4 Who is my target customer? how do I expand my customer set - i.e. my customers customers who are your customers today? In order to grow the company whom should I be targeting? What are the needs of this new customer base? How can I add value from my target customers? How do you add value to customer base? Avoid focusing too much on the competition use technology to create new forms of value How do I become my customers first choice? provide super service - i.e. Ritz-Carlton provide incentives How does my product reach the customer? how are my products delivered? how many steps do they go through before they reach the customer? how many of these steps can be eliminated? can the Internet streamline the process? Do we understand the environment and industry trends? conduct an environmental analysis using consultants identify the trends: technology, competition, customers, demographics, government regulation, etc.

Page 5 Do we understand technology trends? analyze key trends in technologies you rely on are you diversified or betting on a single technology What are the priorities in the supply chain? analyze your partners in your supply chain look at: cycle time, lead times, average inventories, warehousing, ideal channels Who are my competitors? - all of them! check the boundaries of your industry? who are today's top competitors? who are the potential upstarts? Phase 2: Capability Evaluation What internal capabilities do we have today? strength and weakness analysis critical elements include: customer interactions, production and fulfillment, people, technology and core infrastructure goodness of fit between business and information technology strategies What capabilities and resources do we need to execute quickly? alignment of first vision and capabilities linkages across functions are required develop skills for developing enterprise architecture

Page 6 Phase 3: E-Business Design Select an e-business design: an initial set: category killer - 1st to market w/killer app channel reconfiguration - use the internet transaction intermediary - use the internet informediary - reduce search costs self-service innovator channel mastery E-business design refinement- critical questions customer selection - customer segment customer experience - what to offer-unique customer capture - retention of the best scope of design - critical activities and product offerings ease of doing business - 7/24 or ?? organizational systems - capability assessment Clarify the differentiation levels Pick the major dimensions of differentiation What apps are required to support a modern flexible e-business design? E-Business Design in Action: The Case of E*Trade Leading provider of on-line financial services Differences between traditional and start-up planning (refer: Table11.3) a ready, fire, aim approach

Page 7 Why Startups are Successful in Creating E-Business Strategy. The logic of ebusiness differ along the five basic dimensions of strategy Customer assumptions E*Trade added value with 24 hour service, price discounts, direct access to information. Startups dont take their industry conditions as a given Customer segments E*Trade customers - very active and loyal (96%) competition may be in both ranks - traditional and on-line Customer value E*Trade began by wanting to dominate the market did it with low cost and high service - capturing customers from both brokerage segments refine core competencies needed to compete Resources and Capabilities E*Trade takes a clear-slate approach what if we start anew? E*Trade is a first mover-maintain momentum E*Trade uses partnerships to grow E*Trade is building brand name recognition

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Product and service offerings E*Trade expanding by forging new relationships, new and diversified offerings E*Trade is working diligently to maintain its competitive advantage. Future opportunities: Rethinking Organization Structure requires an integrated infrastructure new world has its own distinct opportunities and its own rules successful businesses will play by the new rules and prosper and become market leaders There will always be excuses for not creating a strategic plan - and failing

LECTURE NOTES - Translating E-Business Strategy Into Action Introduction This is a prescription for how to cross the chasm between strategic planning and execution The purpose of a blueprint is to map a course for creating an integrated enterprise while minimizing chaos. Core of the blueprint planning is the relationship between value creation and integration. Blueprint planning addresses two requirements: balancing opportunities for improving application infrastructure through prioritization. achieving the right product mix, so that resources are allocated in ways that enhance the strategic direction The overall process - see Figure 12.1 To patch or not to patch (the existing infrastructure) Citibank Case - Start over from scratch high risk - forced by competition many large or old companies wont take the risk -- they patch

Page 2 Four levels of application use in business: isolated applications - usually single function integrated applications - i.e. call center apps., i.e. SAP application blueprints - family of apps, i.e. CRM enterprise framework - collection of application blueprints Most organizations today are at level two - integrated apps Evaluate your own company, too often youll find: platform projects are taking too long- project gridlock nearly all projects are high $, long term - too big substandard projects are sucking up scarce resources too much reinventing of the wheel technical complexity makes decision making too hard project interdependence is difficult to manage lack of communication and business side buy-in E-Business Blueprint Creation is Serious Business Top management must play a strong role in the process because: blueprint decisions are among the most important a company makes blueprint decisions cut across product lines and divisional boundaries blueprint decisions require resolution of cross-functional conflict

Page 3 Major problem in blueprint creation is that everyone sees it differently depending on where they sit. The problem is not Technology: The Problem is Leadership for large, established companies the biggest impediment to blueprint planning is the lack of consistent attention from top management the root cause of bad planning is delegation Basic Steps of E-Business Blueprint Planning Blueprint creation is a dynamic process where by a businesss list of active projects are constantly updated and revised. Three basic steps to e-business blueprint planning are: prioritization blueprint blueprint case for action application implementation reference Figure 12.2 Doing the Right Projects: A Prioritization Blueprint How should you invest in integration? Management of resource allocation constitutes a critical part of e-business blueprint planning development of the apps portfolio w/ integrated focus is rare

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Current way of prioritizing projects for business line manages to create their apps wish list they ask their subordinates: where do we need to spend money on app enhancements? How much will each enhancement cost? What will we get for the money we spend? Results in too many uncoordinated wish lists Determine overall capital spending budget then allocate it among departments. Integration mandated from the top gets list in the jingle of capital budgeting gains. Types of e-business projects: incremental, break through and platform incremental w/ little structural change, require fewer resources, low risk and enhance existing functionality breakthrough or radical projects involve big changes in the firm - risky, may require clean-slate approach platform or next-generation projects are middle ground - create new structural foundation to be leveraged across the organization

Page 5 Roadmap to an Enterprise Framework Prioritization Plan - the six steps for creating the enterprise framework prioritization plan 1 Do solid up-front homework on current infrastructure and customer priorities 2 Review the current app portfolio across the firm 3 Determine what needs fixing 4 building in differentiation at every opportunity 5 establish the desired future mix of enterprise framework functionality by type: SCM, CRM, e-commerce. 6 Decide which enterprise framework projects to start. Putting it all Together: The E-Business Blueprint Case Every execution phase should begin with creating a business case - to help establish project direction A good business case eliminates two problems immediately: tendency to do nothing tendency to treat e-business as just another project Goal of e-business case is to develop clarity of purpose that allows scarce resources (all of them) to be targeted for maximum results Who develops the e-business case: key roles Chief Information Officer and the Information Technology Organization Chief Financial Officer and the Finance Organization

Page 6 Operating Vice Presidents and their respective organizations Chief Executive Officer, President, Chief Operating Officer or General Manager Senior Management must be visible in actively supporting the activity and being involved Key Elements of a Business Case Justification for the project strategic justification - identifying new capabilities toward obtaining business objectives operational justification - identifying and quantifying specific process improvements from reengineering and the integration of the enterprise apps with these processes technical justification - identifying how enterprise apps support the overall technical strategy of the firm financial justification - cost/benefit via ROI, NPV, IROR, etc. (quantify measures.) Assessing preliminary scope, key elements: organizational - what org. units are included? Functional - what functions, activities, models will be used? High-level application architecture high-level project plan - estimate implementation process resource requirements - all internal and external resources required.

 Assessing Feasibility, along the following dimensions financial - assess C/B organizational and cultural - assess the organization and culture to accommodate a highly integrated enterprise system technical - can the existing infrastructure support the new apps.

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Communicate, Communicate, Communicate: To Sell the E-business Case Use these Rules: Be non-technical - exhibit the human side of IT Address cost, risk and benefits Be brief and succinct (ten pages or less for management reports) communications best practices ( in creating shared values) create a cross-functional architecture team take baby steps - dont give it to them all at once clearly communicate plans and the benefits of the new architecture document success and publish the results anticipate resistance E-Business Project Planning Checklist develop a goal statement - in 20 words or less set measurable goals - 5 or less set objectives - action statement for each goal

Page 8 Identify strategies and tactics for achieving objectives develop short and long term action plans gain approval - from top management and key players Doing the Projects Right: An Execution Blueprint: Transforming Ideas into Working Prototypes - A CRM Example Developing a CRM Execution Blueprint - the Customers Relations Management perspective describes how the business works: goals and objectives regarding customer acquisition, service and retention basic flows of customer information for each product or service functions ( and cross functions) performed in CRM processes major organizational elements and their interactions to produce an outstanding CRM application, an outstanding execution process is required Rapid execution is the norm: 4 implementation imperatives speed - shorter time-to-market cycles efficiency - better resource allocation decisions flexibility - architecture decisions must allow flexibility quality - creativity combined with integrated solutions

Page 9 Transition management - from the old to the new Samsonite Case: systems problem caused: $29.9 million loss, drop-in stock price, many lawsuits, etc. WHY E-BUSINESS INITIATIVES FAIL - BECAUSE THEY DONT HAVE EFFECTIVE BLUEPRINT MANAGEMENT Weak blueprint management to many concurrent projects resources and people spread too thin projects take on a life of their own. Lack of effective blueprint management no rigorous and tough decision points poor project selection Poor blueprint management selecting the wrong projects, for the wrong reasons

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Conclusion Many profound changes are forcing organizations to rethink and broaden their views on integration heightened competition and increasingly sophisticated customers current integration approaches are not quick enough a new style of event-based app is emerging mobile/wireless computing is becoming real everyday To minimize risk executive planning must include: an application framework prioritization process to spotlight important infrastructure projects. A systematic way to create business cases for each infrastructure project a development strategy that implements great ideas.