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Information Technology &

Business Strategy
Sesin 5:
Transformacin Organizacional

UNIVERSIDAD
TORCUATO DI TELLA
Ramiro Montealegre

Todays Agenda

2:00 3:30

Summary: IT in strategy and Biz model

3:30 3:50

Break

3:50 5:20

Case Discussion: Re/Max


+ Organizational change

5:20 5:40

Break

5:40 7:10

IT Infratructure
+ Case Facilitation: Knight Capital

7:10 7:30

Break

7:30 9:00

Case Critique: Knight Capital + Beyond


Information Technology & Business Strategy 2015 Ramiro Montealegre

Effective strategies tackle 3 questions

Why do you do what you do?


How do you want to get there?
What do you need to do?

Information Technology & Business Strategy 2015 Ramiro Montealegre

Five Forces Determine Industry Profitability

New Entrants

Bargaining Power
of Suppliers

Industry
Competitors

Suppliers

Buyers
Rivalry Among
Existing Firms

Threat of
Substitute Products
or Services

Threat of
New Entrants

Bargaining Power
of Buyers

Substitutes

Information Technology & Business Strategy 2015 Ramiro Montealegre

Options for Strategic Positioning

Dominant Exchange
eBay

Exclusive Channel
Rural Wal-Mart

Horizontal Breath
Fidelity

Redefining
Customer Rel.
Saturn

Proprietary Standard
Microsoft, Intel

Enabled through
Effective Use
of Technology

Customer
Integration
EDS

Low Cost
Southwest

Differentiation
Sony

Information Technology & Business Strategy 2015 Ramiro Montealegre

Exercise: Positioning Well-Known


Companies on the Triangle

Information Technology & Business Strategy 2015 Ramiro Montealegre

Exercise: Customer Segmentation

Tier

Description

Information Technology & Business Strategy 2014


2015 Ramiro Montealegre

Existing Business Competencies with Respect to the Strategic Positions


Horizontal Breath
1.

2.

3.

Redefining Customer Experience

Customer Integration

1.

1.

2.

2.

3.

3.

Information Technology & Business Strategy 2014


2015 Ramiro Montealegre

Effective strategies tackle 3 questions

Why do you do what you do?


How do you want to get there?
What do you need to do?

Information Technology & Business Strategy 2015 Ramiro Montealegre

Technology & Business Strategy


Professor Ramiro Montealegre

Information Technology & Business Strategy 2015 Ramiro Montealegre

Elements of a Successful Business Model

Customer Value Proposition


-

Target customer
Job to be done
Offering

Profit Formula
Key Resources
-

People
Technology, products
Equipment
Information
Channels
Partnerships, alliances
Brand

Revenue model
Cost structure
Margin model
Resource velocity

Key Processes
-

Processes
Rules and metrics
Norms

(Johnson, Christensen and Kagermann 2008)

Information Technology & Business Strategy 2015 Ramiro Montealegre

What are you trying to do with


your digital business initiatives?

Augment current
business models
models

Create new
business
Information Technology & Business Strategy 2015 Ramiro Montealegre

The Three Components of a Digital Business Model

Weill and Woerner, 2013


Information Technology & Business Strategy 2015 Ramiro Montealegre

The Value Chain

Firm Infrastructure
Human Resources Management
Technology Development
Procurement

M
A
R
G
I
N

Inbound
Operations Outbound
Logistics
Logistics

Marketing
and
Sales

N
I

Service

G
R

A
M

Information Technology & Business Strategy 2015 Ramiro Montealegre

The Virtual Value Chain

Content

Physical
Virtual

Experience

Platform

Value Chain

Interface

C
u
s
t
o
m
e
r

Demand

Information Technology & Business Strategy 2015 Ramiro Montealegre

Strategy and IT on a Page


Mission
Vision
Strategic
Imperatives

Business
Outcomes

Business
Implications

IT
Implications

Information Technology & Business Strategy 2015 Ramiro Montealegre

Information Technology and Business Strategy

Information Technology & Business Strategy 2015 Ramiro Montealegre

The only person who


likes change is a baby
with a wet diaper
Mark Twain

Information Technology & Business Strategy 2015 Ramiro Montealegre

ERP System

Human
resources

Manufacturing

Data
analysis
Sales

ERP
System
Services

Finances
Supplychain
Information Technology & Business Strategy 2015 Ramiro Montealegre

Organizational Change

- Assumptions
- Nature and Focus
- Tactics

Information Technology & Business Strategy 2015 Ramiro Montealegre

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Case Study Research

Riding the Wave of


Technological Change
at RE/MAX, LLC.

Information Technology & Business Strategy 2015 Ramiro Montealegre

RE/MAX: The 100% Commission Company


AconceptdevelopedbyentrepreneurDaveLinigerinthe1970s.
Hasbecomeoneofthelargestrealestatefranchisebusinessinthe
world(over90,000agentslocatedin80countries)
Mountain States
(MR)

St. Louis
(OR)

Southwest
(MR)

California/ Hawaii
(OR)

Carolinas
(OR)

Caribbean
(OR)

Central/Northern
Ohio (OR)

Western Canada
(OR)

Kentucky/
Tennessee (IR)

Northern Illinois
(IR)

Alaska
(IR)

Texas
San Antonio (IR)

Georgia
(IR)

Mid-States: OK,
KS, AR (IR)

New England
(IR)

Texas Houston
(IR)

Michigan
Outstate (IR)

Nebraska/Iowa
(IR)

New York
(IR)

Texas Dallas
(IR)

Florida (OR)

Minnesota
(IR)

Missouri
(IR)

OhioSouthern
(IR)

Wisconsin
N. Central (IR)

Canada
(IR)

Ecuador
(IR)

Cape Verde
(IR)

DixieAlabama
Louisiana,
Mississippi (IR)

Indiana
(IR)

New Jersey
(IR)

Southern
Michigan (IR)

Peru
(IR)

Colombia
(IR)

Micronesia
(IR)

Chile
(IR)

Uruguay
(IR)

Singapore
(IR)

Argentina
(IR)

Western Australia
(IR)

Mexico
(IR)

Venezuela
(IR)

Arabian
Peninsula (IR)

Morocco
(IR)

Central Atlantic
(MR)

Pennsylvania/
Delaware (OR)

Pacific Northwest
(OR)

RE/MAX Brazil
Master Franchise
Sergipe, Santa Catarina, Pernambuce, Piaui,
Brasil, Sao Paulo, Rio Grande Do Norte,
Alagaoas, Patana, Batria, Rio Rande Do Sur,
Rio de Janeiro, Espirito Santo, and Ceara

RE/MAX, LLC
Master
Franchisor

New Zealand
(OR)

Australia
(OR)

Southern Africa
(IR)

RE/MAX Europe
Master Franchise

RE/MAX India
Master Franchise
North Gujarat, Chennai, Chandigarh-Mohali-Panchkula,
Punjab 1, Bengaluru, Madhya Pradesh 1, North Mumbai,
Pune, Rajasthan B, Hyderabad, Delhi NCR, Rest of
Andhra Pradesh, South Gujarat, South Mumbai,
Vidarbha, and Kerala

Denmark, Finland, Iceland, Malta, Slovenia, UK-London, UKMidlands, UK-North, UK-South, Wales, Ireland-Northern,
Ireland-Republic of, France, France-Lie de France, FranceNortheast, France-Northwest, Croatia, Germany-North,
Germany-Central, Germany-West, Germany-East, GermanyBavaria, Germany-Southwest, Slovakia, Belgium, Bulgaria,
Czech Republic, Greece, Austria, Hungary, Italy-Northern,
Italy-Central, Italy-Southern, Israel, Luxemburg, Lithuania,
Latvia, Estonia, Montenegro, Netherlands, Norway, PolandEast/Central, Poland-North/West, Poland-South, Portugal,
Romania, Scotland, Serbia, Spain-Barcelona, Spain-Madrid,
Sweden, Switzerland/Liechtenstein, and Turkey

Legend: MR=Managed Region; OR=Owned and Managed Region; IR=Independent


Region Technology & Business Strategy 2015 Ramiro Montealegre
Information

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RE/MAX,likeanyfranchisebusiness,financialviability
basedonmaintainingandgrowingmarketshare
Keyobjectives:sellingfranchisesandhiringandretainingagents
KeyValueproposition:
Strongbrandname
Provenbusinesspractices
Topclasssupport(trainingandeducation,IT,andtimely
marketknowledge)
Realestateprofessionalsthatareinbusiness
for themselves,butnotby themselves.
Information Technology & Business Strategy 2015 Ramiro Montealegre

U.S. Residential Real Estate Industry

One of the largest sector in U.S. economy ($60-70 Billion)


Highly competitive at all levels
Returns fluctuate with the health of the national economy
In the past decade, it has been a roller coaster

Information Technology & Business Strategy 2015 Ramiro Montealegre

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Agents
150,000
100,000
50,000

1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Offices
8,000
6,000
4,000
2,000
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Owners

Countries
15,000

100
80
60
40
20
0

10,000
5,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011

2002 2003 2004 2005 2006 2007 2008 2009 2010

Information Technology & Business Strategy 2015 Ramiro Montealegre

ITatRE/MAX,LLC.
Historically,akeycomponentofcompanysmarketingstrategy.

2009

CD-ROM
Agent Roster

2010

Web
Roster on
Mainstreet

2006

RE/MAX
Agent 2000

2010

Mainstreet
1.0
2002

1998
RE/MAX
Satellite
Network

2006

1990

RE/MAX
Forum on
CompuServe

remax.com
undergoes a
major redesign

2005

Remax.co
m
2001

1993

RE/MAX
Office
Management
Systems
(internal)

1992

1989

1995

1992

Ourbrokerscanrecruitandretainagentsmoreeasilybymakingavailabletothemtechnologicaltools
thatgenerateleadsandreferrals,facilitatenetworkcommunication,andtracklistingandsales
activities
FormerRE/MAXPresident,DarylJesperen(2001)

RE/MAX
University
On-Demand
Training
available
anywhere,
anytime

All listings on
Remax.com

Mainstreet 2.0
Source: RE/MAX, LLC.

Information Technology & Business Strategy 2015 Ramiro Montealegre

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Surviving Disruption
What are the key distinction between
SUSTAINING and DISRUPTIVE innovations?
-

SUSTAINING innovation maintains a steady rate of


product improvement.

DISRUPTIVE innovation:
Often sacrifice performance along dimensions that are
not important (or dont create value) to current
customers
However, the new attributes can open up new markets

Performance

Disruptive Technologies: A driver


of leadership failure

Disruptive
technology

Time

14

Information Technology & Business Strategy 2015 Ramiro Montealegre

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... In the process of transitioning

from
SupportingAGENTStoservecustomers

to
SupportingCUSTOMERSbyanenablingnetwork
Information Technology & Business Strategy 2015 Ramiro Montealegre

The Primary Objectives of the


RE/MAX Case Study
Illustrate a common challenge facing companies
today: how to prepare for, and adapt to, a digital
world
Discuss whether RE/MAX business model can
continue to thrive in the new environment
(customer-centric, rapid and unpredictable
technological changes, and increasing internal
complexity)
Information Technology & Business Strategy 2015 Ramiro Montealegre

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ORGANIZATIONAL CHANGE: NATURE AND FOCUS

POTENTIAL BENEFITS
Operational

Strategic
Business
Reeng.

Transformation
NATURE
OF CHANGE

Process
Reeng.

automate

High

POTENTIAL
RISK

Process
Simplification
Incremental

Process
Improvement
Internal

Low
External
FOCUS
Information Technology & Business Strategy 2015 Ramiro Montealegre

Change Tactics

Multi-organization
Multi-processes
Single Process
Transformational
(Radical)

Incremental

NATURE OF CHANGE

FOCUS
OF
CHANGE

Evolutionary

SPEED
OF
CHANGE
Revolutionary

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References
Change Through Persuasion, Garvin, D. and Roberto, M., Harvard
Business Review, February 2005.
Your Companys Secret Change Agent, Pacale, R.T. and Sternin
J., Harvard Business Review, May 2005.
The Underlying Structure of Continuous Change, Lawrence T.B.,
Dyck, B., Maitlis, S., and Mauws, M., MIT Sloan Management Review,
Summer 2006.
Overcoming Resistance to Change, P. Michelman, Harvard
Management Update, July 2007.
From mental models to Transformation, J. Wind and C. Crook,
Rotman Magazine, Spring 2009.
Immunity to Change: How to Overcome It and Unlock Potential in
yourself and your organization, R. Kegan and L. Lahey, HBS Press,
2009.
Achieving Successful Strategic Transformation, G. Johnson, G.
Yip, and M. Hensmans, MIT Sloan Management Review, Spring 2012.
Information Technology & Business Strategy 2015 Ramiro Montealegre

For Next Class

Please prepare:
Knight Capital Americas

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