The Critical Role of the CEO IT

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“The Critical Role of the CEO & IT Professional in the E-Business Revolution” IT World. Expo THE Global Event on Information Technologies October, 2004 Presentation By: Dr. John T. Whiting, Director E-Business Enablement Services October 27, 2003 www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved

The “E-Business Revolution” is Real • It is bigger and more impacting than the Industrial Revolution. • It is happening more swiftly than most people realize. • It is changing how the world engages in business. • Many companies are not prepared. • Companies that are prepared have a significant competitive advantage. • Companies that are not prepared face threat of failure. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 2

Discontinuance* What is Discontinuance? Discontinuance occurs when an idea or innovation is so powerful that it causes the discontinuance of the previous process and replaces that outdated process as the new standard. See Geoffrey Moore’s Inside the Tornado www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 4

IT Discontinuous Innovation 1 makes business processes: Faster Easier More efficient More cost effective More profitable. 1 See Geoffrey Moore’s Inside the Tornado for more on Discontinuous Innovation. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 5

An Opportunity or Threat to Business • Experts have stated that the e-business revolution is inevitable! • Those companies who learn to manage this powerful resource will thrive, but those that ignore this reality will face difficulty competing and many will fail. • *Source: The Gartner Group www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 6

What is “E-Business” and Why is it Inevitable? E-business is the new enterprise business operating structure emerging from … “The Fusion of Business & Technology” www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 7

The History of Discontinuance Driving the Migration of Business to an E-Business Enablement Model 1970 1980 Manual statistical Paper Ledger analysis Based Accounting Typewriter 1990 2000 Tim Berners-Lee Launches the 1 st web site The Hershey Physical Word ERP Failure Inventory 9/11/01 Processor Fax, carbon copies, telephone, US mail E-Commerce Libraries, books, Y 2 K retail buying, etc. US mail, All traditional business Fed. Ex, Fax E-Business processes The Proprietary Hardware Era The Vendor Driven Software Era E-Mail Internet/WWW LAN/WAN Desk Top PCs JIT Inventory/ERP Management/Bar Codes Word Processing Finance & Control Defense, Science & Research www. e-businessmanagement. com Discontinued Business Processes Technology Innovation 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved Enablement CRM B 2 B B 2 E Economic B 2 M slow down RFID VOIP VR etc. . com failures 9

E-Business will provide a competitive advantage. 2005 2004 2003 2002 Increased: • competitive advantage • sales/market share/reach • efficiency • productivity • customer service • operations mgt. • vendor relations • cost control • communications • profit margins • portal based management Competitive Advantage Decreased: • lost sales Will Thrive! Not E-Business Enabled May Fail! E-Business Enabled www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved • lost efficiency • lost productivity • lost customer service • poor operations mgt. • lost vendor relations • poor communications • lost profits • lost competitive advantage 11

However it is Critical to Get It Right • What are the consequences that can come from poor e-business decision making? www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 12

The Hershey ERP Failure What happened? • $115 million ERP system failed July, 1999! • Third quarter sales dropped 12% as a consequence of not being able to service the Halloween, Christmas & Valentine peak seasons. • Earnings loss of 18. 6% representing a loss of $150 million in sales. • Decline in stock price from $58 to $38 in January 2000 www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved

The 1999 ERP Failure Y 2 K Effect Hershey Foods ERP Correction 9/11/01 Performance 10/02/03 Economic Slowdown, War, Wall Street Problems www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 16

How did Hershey turn it around & what was learned? • “The business and technology divisions worked more closely together. ” • “We made sure there was alignment between information technology and the business. ” • “We had the proper (top) management commitment. ” ü Lesson #1 - IT decision making must be escalated to the strategic business level based on ROI and performance criteria! ü Lesson #2 – IT initiatives must be integrated into the strategic business plan and map to the strategic business goals of the company! ü Lesson #3 – IT (E-Business) must be managed at the P&L level! Source: Philadelphia Inquirer www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 17

The Y 2 K Effect Impact Period The IT Industry Profile of Performance July 2000 www. e-businessmanagement. com Economic Slowdown, War, Wall Street Problems, etc. 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 31

Why is the IT Industry Down? • Y 2 K absorbed corporate buyer spending dollars making them unavailable for standard purchases. • CEOs shifted the buyer market from the technical tactical level to the strategic business level. • IT companies have been slow to modify sales and marketing strategies to accommodate this change; • CEOs are skeptical of IT sales initiatives due to past experience and the failure of IT to perform; • CEOs will not listen to a “sales pitch” about technology; • IT companies have not learned how to refine their sales presentations to present business value based on ROI criteria. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 32

The Challenge Facing CEOs 1. Learn how to escalate IT from the tactical technical level to the strategic business level! 2. Learn how to integrate e-business into the strategic business plan! 3. Manage and control e-business resources at the CEO and P&L level based on ROI criteria! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved

Are CEOs Spending Money on IT? • In 2001 corporate buyers paid $3 billion to IBM to outsource e-business resources; • In 2002 corporate buyers paid $35 billion to IBM to outsource e-business resources! • What does that tell us? www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 43

Outsourcing is a Temporary Answer • Why? • CEOs don’t like giving a third party control over business operations and information; • Outsource solutions are “boiler plate” not allowing IT to be customized to the unique needs of the company; • Outsourcing is expensive! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 45

What will Cause CEOs to End Outsourcing? • When they learn they can bring IT “in-house” cost effectively based on a methodology they can trust! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 46

The Problem: • Historically CEOs have limited skill in the use of technology, how it can be used to drive their business and have isolated themselves from Technical Professionals; • Technical Professionals have limited business expertise and limited capacity to advise CEOs on how the company can use technology to improve business performance! • This has created a barrier preventing many companies from effectively leveraging technology producing a threat to the performance and survival of some businesses. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 48

The Challenge Facing the IT Professional • IT professionals have little, if any training in business and business management principles; • IT professionals have a preference for IT problem solving versus business decision making; • IT professionals have no incentive to initiate ebusiness enablement initiatives; • IT professionals may tend to see e-business enablement as a threat to their level of expertise and job security. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 49

What Should IT Professionals Do? • The e-business revolution is inevitable! • IT professionals should take affirmative action to influence and add value to the company by helping the company achieve e-business enablement; • IT professionals must ask the question, “Who will the CEO blame if the company looses competitive advantage to an enabled competitor? ” www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 50

The Solution: • The IND E-Business Enablement Methodology™ is a “Road Map” to guide CEO’s in achieving: ü the escalation of IT from the tactical and technical level to the strategic business level: ü the integration of IT into the company’s strategic business plan; ü the ability to manage IT at the CEO level with ease based on ROI criteria. The IND Methodology bridges the gap between business and technology! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 51

The IND E-Business Enablement Methodology ™ Note: The process is continuous allowing for strategic planning and budgeting! Phase V - Full Enterprise Inter-Function E -Business Enablement The Full Integration of IT/Internet E-Business Technology Across All Enterprise Business Functions Phase IV - Full Intra Function E-Business Enablement Expanded ROI Projects to Achieve Full Function Enablement Phase III - Prescription of Intra. Function(s) ROI “E” Projects Web based E-Business ROI Project Identification Within Enhancements Key Business Functions Diagnosis of Status for EBEP and to Target ROI Priorities E-Business Enablement Plan (EBEP) Development and Targeting of ROI Projects Phase II - Phase I - Discovery of “E” Status, Discrepancy and Needs www. e-businessmanagement. com Gathering of Baseline Data to Identify EBusiness Enablement Status: ·Business Policy Status ·Technology/User Status 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 53

$ Power of and E-Business Web Services Marketing Research Web based Market Analysis Sales Promotions Marketing Planning Web based Market Requirement Determination Advertising Sales Operations Sales Training Order Servicing www. e-businessmanagement. com Sales Direction Direct Sales 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 55

…leading to gains in efficiency and competitive advantage! How? Instant access to information! Logistics/Customer Service Distribution Planning Strategy Planning Communication & Management Systems & Operations Planning Facility Utilization Manpower Planning Storage Location & Layout Service Performance www. e-businessmanagement. com Order Processing Purchasing Supply & Storage Management Systems Receiving Customer Service Materials Management Operations Forecasting Procurement Scheduling Inventory Control Engineering Distribution Controls Service Delivery Scheduling 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved Monitoring & Evaluation 56

The goal: Quality management based on instant access to information across the e-business enterprise 60/24/7 P&L Portal Based Management E-Business Transformation Officer CEO Monitors Company Performance Via “E” Portal Operations Management R&D Production Logistics Marketing Finance & Control Human Resource (Total Enterprise Interconnectivity) Interoperability * Source: E-BMC White Paper Back 2 www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved Return 57

The Technology Adoption Life Cycle (TALC) Answers Key Questions: • What technology should I buy; • When should I buy it? www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 60

The Technology Adoption Life Cycle (TALC) Level of Acceptance 100 % Early Market Main Market Declining Market Low ROI Low Risk & High ROI High Risk 2 to 3 years 0% Technical Enthusiasts Time Visionaries Pragmatists (Business Users) Conservatives Skeptics Changing IT Buyers Over the Life Cycle 5 years +/Source: Inside the Tornado www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 61

The Open Systems Interconnection (OSI) Model Answers Additional Questions: • What technology will complement our e-business enablement strategy; • Why doesn’t legacy technology work? • What are the risks associated with proprietary IT and IT service provider “Specialists’? www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 62

The Open Systems Interconnection Standard (OSI) SSA GT Layer 7 Layer 6 Layer 5 Ortems Web Age Solutions Application Layer Protocols that allow application processes to communicate Presentation Layer Format, translation, syntax, encoding & compression protocols Klee Group Protocols to open, maintain, close an information exchange Session Layer 4 Transport Layer 3 Network Layer Protocols to open, maintain, close an information exchange Equant Addresses, traffic & routing determination protocols Layer 2 Data Link Layer 1 Physical Layer Transfer of error free data between computers via the physical layer Transmission of raw data over physical medium (cable) The “E” System = www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved Forward 63

What Are the Basic Elements of E-Business Enablement? • Corporate policy change regarding IT decision making and use; • Core standards based technology: 1. Enterprise network & network management; 2. Security, backup & disaster recovery; 3. Data centralization, management and sharing; 4. Application integration across all business functions. www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 64

E-BMC Mission is to … • Ensure client business viability by the knowledge transfer and e-business enablement service essential to remaining strong and competitive! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 65

The Goal: E-BMC partnering with CEOs and IT Professionals to achieve the benefits that can come from e-business enablement! www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 66

E-BMC Contact Dr. John T. Whiting, Director E-Business Enablement Services 973 -764 -0375 john. whiting@e-businessmanagement. com http: //www. e-businessmanagement. com 2004 © E-BMC/Dr. John T. Whiting All Rights Reserved 68