Information Strategy as a Key Success Factor for

Information Strategy as a Key Success Factor for Enterprises and Universities Presented by Dr. Donald A. Marchand Professor, Strategy & Information Management, IMD, Lausanne, Switzerland, Chairman & President, enterprise. IQ Ecublens, Switzerland Bielefeld-040109

The Elusive Value of IT “The Information Technology (IT) Paradox” Worldwide IT Spending (In Trillions of Dollars) Source: Gartner Dataquest June 2003 2 Copyright © 2003 All Rights Reserved Bielefeld-040109

The Link of IT Spending to Company Performance X √ Information Technology Investments Business Performance (Profitability) Increased Company Output Capital Flows √ Falling Market Prices (Competition) { { Competitive Advantage Competitive Necessity IT Innovation Customer Benefit The IT Industry Source: Hitt and Brynjolfsson, 1996 3 Copyright © 2003 All Rights Reserved Bielefeld-040109

To Impact Business Performance, Managers Typically Look at IT as a Visible (Hard) Factor That They Can Invest in and Influence IT Practices 4 Copyright © 2003 All Rights Reserved Bielefeld-040109

Soft Factors are not Captured and Factored into these Measurement Approaches Information Orientation (IO) { • Difficult to See Information’s Value • Difficult to Measure Employees’ Behaviors and Values Information Behaviors and Values 5 Information Management Practices Information Technology Practices • Difficult to Manage Better Knowledge Management and Use Copyright © 2003 All Rights Reserved Bielefeld-040109

The Cemex Way: The IT Legend “Cemex in a league with Dell and Cisco as one of the world's leading digital re-inventors. ” (Business Week) CEO Zambrano can check sales “In Latin America, figures or kiln temperatures in Cemex uses time any plant in the world from a division multiplexer communications center in satellite Monterrey that looks like a set networks. ” from a science fiction movie (Computer. World) (Forbes) or NASA’s control room in Houston (The Economist). In each case, "post-merger integration teams" ie, executives armed with laptops, were dispatched to analyse the new acquisition, to cut costs, and to harmonise its technical systems and management methods with CEMEX's. “Cemex's ready-mix In our fifth e-strategy delivery trucks brief, we look at a are equipped with rarity: a company in dashboard the industrializing computers that world that has used allow tracking by e-business to steal global positioning a march on its richsatellite (GPS) world rivals (Wired) technology. ” Bielefeld-040109

Cemex – Global Growth Through Superior Information Capabilities 1 2 3 Globalization: Latin Emerging Markets Refocus in the Core Business-Cement: Becoming a Domestic Leader Domestic Conglomerate Global Growth Building IT Infrastructure - built satellite telecommunications system & other IT infrastructure - trained people how to use it Focusing on People & Processes - developed post acquisition expertise - hired "people oriented" IT managers - conducted training on human philosophy by Fernando Flores - implemented business process re-engineering program - built an entrepreneurial mood Building Information Capabilities x 1906 Company was formed 7 x 1984 x 1985 L. Started selling Zambrano non-core became businesses CEO x 1987 Iniguez joined Cemex x 1992 Acquired Spanish operations x 1993 Cemtec was formed x 1995 x 1997 Launched Entered Asia - DSO acquired a company in Philippines Copyright © 2003 All Rights Reserved Bielefeld-040109

Cemex – Global Growth Through Superior Information Capabilities 5 4 Growth in Developed Markets & Embarking on E-Ventures Expansion into Non-Latin Emerging Markets Global Growth Building Information Capabilities x 1997 Entered Asia - acquired a company in Philippines 8 E-Business: 1. Intranet Internet Extranet x 1999 Listed in NYSE E-Business: 2. Cx. Networks a. dot. com - Construmix - Latinexus - Construplaza b. e-business consulting - Neoris x 2000 Acquired Southdown; Cx. Networks formed x 2001 The Cemex Way: Information, IT & People - standardizing information system & process - e-enabling work force & supply/demand chain - creating information-culture among & providing training to employees, customers, suppliers & alliance partners, e. g. e-selling, e-procurement & e -workforce initiatives E-Business: 3. distribution logistics (Co. Site) & expansion in the construction industry ( Arkio) Time & Milestones Copyright © 2003 All Rights Reserved Bielefeld-040109

The Cemex Way: The Facts “Contrary to what you read in the popular press, our success was not based on developing a good IT system. The press likes to focus on IT and our outcomes, but not about what we have been able to accomplish with our people. What we did was create a new culture at Cemex, one that was based on commitments, and action. ” Gelacio Iniguez, former CIO, Cemex, current CTO of Cx. Networks 9 Copyright © 2003 All Rights Reserved Bielefeld-040109

What is the Relationship Between the Deployment and Usage of IT and Information in your Organization? Deployment ? Usage = Business Value ? Deployment - Usage = Dilutes Value Deployment + Usage = OK Deployment x Usage = Multiplier Effect Deployment of I/T inside and outside the organization 10 Usage of I/T by managers, employees, suppliers, customers, and partners Return for Driving Business Performance Copyright © 2003 All Rights Reserved Bielefeld-040109

Breakthrough: Scientific measure of the interaction of people, information and technology and its proven link to business performance Information Orientation Business Performance { • Market Share Growth • Financial Performance • Level of Innovation • Superior Company Reputation Information Behaviors and Values 11 Information Management Practices Information Technology Practices Copyright © 2003 All Rights Reserved Bielefeld-040109

Four Years of Leading Edge Innovative Research • Conducted at Europe’s leading Business School -- IMD in Lausanne, Switzerland – Over 100 global companies including: – More than 1200 senior managers – Across 26 industries – Nearly 40 countries • Leading international business publications Oxford 12 M. I. T. Wiley Copyright © 2003 All Rights Reserved Bielefeld-040109

New Performance Metric Information Orientation is the first, validated Measure of Information Effectiveness to Business Performance People Information Technology Proactiveness Sensing IT for Management Support Sharing Processing Transparency IT for Innovation Support Maintaining Control IT for Business Process Support Organizing IT for Operational Support Information Behaviors and Values (IBV) Formality Integrity 13 Information Management Practices (IMP) Information Technology Practices (IMP) Collecting Copyright © 2003 All Rights Reserved Bielefeld-040109

The Maturity Framework: Management Prescriptions for Information and Knowledge Use Information Management Practices Information Technology Practices Proactiveness IO Maturity Information Behaviors And Values Sensing Sharing Processing IT for Management Support Transparency Maintaining Formality Organizing Integrity 14 Control Collecting IT for Innovation Support IT for Business Process Support IT for Operational Support Copyright © 2003 All Rights Reserved Bielefeld-040109

Differences Between High and Low Companies BBVA European Bank 15 Copyright © 2003 All Rights Reserved Bielefeld-040109

The Displays a Company’s Strengths and Weaknesses Hot!!! Results Capabilities IO total Cold!!! The displays the ranking of managers’ responses to the IO Diagnostic. TM relative to the enterprise. IQ international benchmark. This report provides a drill-down analysis across 24 critical management areas that affect a company’s performance. 16 Copyright © 2003 All Rights Reserved Bielefeld-040109

A Large Northern European Retail Bank: Low , Low Business Performance • • 17 The majority of IT resources and personnel were committed to converting the IT operational and transaction systems of the bank with that of a merged bank. After five years, only 80% of the two systems had been merged. Two additional restructuring programs, the transition to the Euro, and Y 2 K during the late 1990 s continued to focus the IT department’s attention almost exclusively on infrastructure and operational issues. Copyright © 2003 All Rights Reserved Bielefeld-040109

Low , Low Business Performance • Customer channels fragmented • Cross-selling in the branches failed • Relationship managers relied on personal systems • Product managers had inadequate decisionmaking tools and complained of overload • Senior managers blamed "IT problems" for under performance 18 Copyright © 2003 All Rights Reserved Bielefeld-040109

Contrasting levels of information Practices produce different IO and Business Performance results Bank A A Large Southern European Bank High IO, High Business Performance Top 5% 19 Copyright © 2003 All Rights Reserved Bielefeld-040109

Banco Bilbao Vizcaya Argentaria (BBVA): Executing Growth Strategies with Dynamic Information Capabilities Company transformation Set-back • New banking model: branches to focus on selling to customers, not performing transactions • Increases the effective use of customer information No clear strategy: internal political struggle; lack of leadership Business Strategies Expansion into Latin America • Develops an acquisition policy • Invests US$ 4 billion in Latin America • IBV: Promotes transparent company culture & encourages employees to share information in & across branches • ITP: Develops a single IT infrastructure to integrate all channels • IMP: Sets up information management tools and processes; & trains employees on how to collect, maintain and use information Building Dynamic Information Capabilities to Achieve High IO • ITP: Builds a single IT infrastructure in Latin America • IMP: Changes partners’ systems & processes • IBV: “Cross fertilization” program to change management’s mind-set Developing High IO x 1988 x 1989 x 1994 One co. Uriarte initiates executive Banco de Bilbao meeting to develop & Banco Vizcaya chairman dies; Ybarra transformation plan & merge becomes sole starts road shows to chairman rebuild morale & establish sharing culture x 1995 1 st 1000 Day Program launched x 1997 2 nd 1000 Day Program launched Time & Milestones x Oct. 19, 1999 BBV & Argentaria merge Bielefeld-040109

Banco Bilbao Vizcaya Argentaria (BBVA): Executing Growth Strategies with Dynamic Information Capabilities Creating an International Brand • Integrates 2 banks • Acquires more operations • Transfers banking model to partners to create a global BBVA brand & to leverage its technology, people, knowledge, and large customer base Business Strategies IO gh Hi Building Dynamic Information Capabilities to Achieve High IO x Oct. 19, 1999 BBV & Argentaria merge x Jan. 1, 2000 Merger project starts x Feb. 2000 3 rd 1000 -Day Program launched - CRE@; alliance with Telefonica • Integrates systems & processes of the 2 banks’ global operations and other newly acquired operations, and creates an acquisition & merger capability • Integrates e-technologies into its business model: • Launches e-sell, e-make , e-buy & IT architecture initiatives • Develops E-banking, e-Commerce & e-Ventures initiatives, e. g. BBVAnet • Launches initiatives with Telefonia: Uno-e. com, CRM, BBVA Ticket, Adquira. com, Food. Service & Katalix Time & Milestones x June 2000 Acquires Bancomer x Jan. 2001 Merger project complete; buys out 2 banks in Argentina & Colombia; drops some Telefonia projects; launches new Telefonia initiatives Bielefeld-040109

Characteristics of Organizations with Low and High IO - Examples Low IO High IO • People do not know enough about their customers to adequately serve and anticipate their needs • Information is easily accessed across organizational boundaries and hierarchies • Efforts to serve customers have failed due to a lack of information and sharing across channels • There is no clear payback from ever increasing IT investments • Many decisions are made on gut -feel rather than the facts 22 • Managing Information – collecting, organizing, maintaining – is viewed as everyone’s responsibility • Information Technology is viewed as integral to the organization’s business – not simply as a support function • Managers have a keen sense of urgency about what they don’t know Copyright © 2003 All Rights Reserved Bielefeld-040109

IO enables an Organization’s strategy Vision: Global Leadership Challenges • • • Customer-Driven People-Centric Team-Focused Entrepreneurial Results-Oriented Through: • Customer Focus • Differentiation • Strengthening Core Activities • Leveraging IT Effective Use of Information & Knowledge Leveraging What We Know Behaviors Information Technology Proactiveness Sensing Management Sharing Processing Innovation Transparency Maintaining Control Organizing Formality Collecting Business Process Operations Integrity HIGHER to Leads s ivenes Effect ation Inform Superior Organizational Services and Products Bielefeld-040109

Many organizations have developed performance scorecards, but until the IO Maturity Framework and Metric were developed, they had no effective way of seeing, measuring and managing their information capabilities. Example – Company Performance Scorecard Financial What we must deliver to our shareholders Client What our clients expect from us Increase shareholder value Grow revenue Long-term supplier for high quality products Client Focus Internal What processes we must excel at Missing Performance Measure! Information Orientation How we must develop our information capabilities 24 Maintain top financial strength Maximize sales Maximize business opportunities Build consistent and deeper client relationships Maximize investment return Maximum Client Value The right product mix Delivery Focus Understand client needs Package and ship products efficiently Expand leverage leadership in logistics intelligence Improve expense productivity High quality and certified manufacturing Operational Excellence Manage our inventory Streamline and improve business and information processes Enhance and comply with quality management processes Ensuring the effective usage of information within and across functions Copyright © 2003 All Rights Reserved Bielefeld-040109

Breakthrough: The Information Orientation of an organization is linked to performance Information Orientation Business Performance People Information Technology Proactiveness Sensing Processing Maintaining Control Organizing • Superior Company Reputation Business Process Operations Formality Integrity 25 • Level of Innovation Transparency • Financial Performance Management Sharing { • Market Share Growth Collecting Copyright © 2003 All Rights Reserved Bielefeld-040109

Information Orientation (IO) measures the effectiveness of information and IT usage by the organization’s people which impacts performance New Business Formula D x U Deployment x of I/T Effective = Usage of I/T by our people Information Orientation (IO) 26 = BV = Expected- Business Value Performance Copyright © 2003 All Rights Reserved Bielefeld-040109

How Managers Can Extract the Full Organizational Value from Information and Technology (I/T) –The Multiplier Effect New Business Formula D x U Deployment x of I/T = BV Effective = Usage of I/T by our people Impact on- Business Value Competitive Necessity Technology Strategy Information Strategy Technology Orientation Information Orientation Cost Savings for Efficiency 27 Competitive Advantage Creating Value for Effectiveness Copyright © 2003 All Rights Reserved Bielefeld-040109

Lessons Learned About Managing Information, People and IT to Improve Organizational Performance • The mindset and actions of an organization’s managers are critical to effective information use and to achieving performance results with information, people and IT capabilities –only managers can drive information strategy! • Building an organization’s Information Capabilities is as much about people behaviors and information practices as it is about IT –managers’mindsets and actions influence information behaviors and values! • Leveraging information and knowledge for performance impact is no longer « soft » or « intangible » : We can see, measure and leverage these assets by managing the Information Orientation of our organization. 28 Copyright © 2003 All Rights Reserved Bielefeld-040109