Where and under what circumstances is the “invest first, analyze later” approach appropriate where and when is it inappropriate
Where and under what circumstances is the “invest first, analyze later” approach appropriate where and when is it inappropriate
Where and under what circumstances is the “invest first, analyze later” approach appropriate where and when is it inappropriate
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Case 1 - HOW GENERAL MOTORS IS
COLLABORATING ONLINE
The Problem
Designing a car is a complex and
lengthy task. Take, for example, General Motors (GM). Each model created needs to
go through a frontal crash test. So the company builds prototypes that cost
about one million dollars for each car and tests how they react to frontal
crash. GM crashes these cars, makes improvements, then makes new prototypes and
crashes them again. There are other tests and more crashes. Even as late as the
1990s, GM crashed as many as 70 cars for each new model.
The information regarding a new
design and its various tests, collected in these crashes and other tests, has
to be shared among close to 20,000 designers and engineers in hundreds of
divisions and departments at 14 GM design labs, some of which are located in
different countries. In addition, communication and collaboration is needed
with design engineers of the more than 1,000 key suppliers. All of these
necessary communications slowed the design process and increased its cost. It
took over four years to get a new model to the market.
The Solution
GM, like its competitors, has
been transforming itself into an e-business. This gradual transformation has
been going on since the mid-1990s, when Internet band width increased
sufficiently to allow Web collaboration. The first task was to examine over
7,000 existing legacy IT systems, reducing them to about 3,000, and making them
Web-enabled. The EC system is centered on a computer-aided design (CAD) program
from EDS (a large IT company, subsidiary of GM). This system, known as
Unigraphics, allows 3-D design documents to be shared online by both the
internal and external designers and engineers, all of whom are hooked up with
the EDS software. In addition. Collaborative and Web-conferencing software
tools, including Microsoft’s NetMeeting and EDS’s eVis, were added to enhance
teamwork. These tools have radically changed the vehicle-review process.
To see how GM now collaborates
with a supplier, take as an example a needed cost reduction of a new seat frame
made by Johnson Control GM electronically sends its specifications for the seat
to the vendor’s product data system. Johnson Control’s collaboration systems
(eMatrix) is integrated with EDS’s In graphics. This integration allows joint
searching, designing. Tooling, and testing of the seat frame in real time,
expediting the process and cutting costs by more than 10 percent.
Another area of collaboration is
that of crashing cars. Here designers need close collaboration with the test
engineers. Using simulation, mathematical modeling, and a Web-based review
process. GM is able now to electronically “Crash” cars rather than to do it
physically.
The Results
Now it takes less than 18 months
to bring a new car to market, compared to 4 or more years before, and at a much
lower design cost. For example, 60 cars are now “Crashed” electronically, and
only 10 are crashed physically. The shorter cycle time enables more new car
models, providing GM with a competitive edge. All this has translated into
profit. Despite the economic show down. GM’s revenues increased more than 6
percent in 2002. while its earnings in the second quarter of 2002 doubled that
of 2001.
Questions:
1. Why did it take GM over four
years to design a new car?
2. Who collaborated with whom to
reduce the time-to-market?
3. How has IT helped to cut the
time-to-market?
Case 2 -Intranets: Invest First,
Analyze Later?
The traditional approach to
information systems projects is to analyze potential costs and benefits before
deciding whether to develop the system. However for moderate investments in
promising new technologies that could offer major benefits. Organizations may
decide to do the financial analyses after the project is over. A number of
companies took this latter approach in regard to intranet projects initiated
prior to 1997.
Judd’s
Located in Strasburg. Virginia,
Judd’s is a conservative, family-owned printing company that prints Time
magazine, among other publications. Richard Warren. VP for IS. Pointed out that
Judd’s “usually waits for technology to prove itself…. But with the Internet
the benefits seemed so great that our decision proved to be a no-brainer.”
Judd’s first implemented internet technology for communications to meet needs
expressed by customers. After this it started building intranet of the
significance of these applications to the company is the bandwidth that
supports them. Judd’s increased the bandwidth by a magnitude of about 900
percent in the 1990s without cost-benefit analysis.
Eli Lilly & Company
A very large pharmaceutical
company with headquarters in Indianapolis, Eli Lilly has a proactive attitude
toward new technologies. It began exploring the potential of the Internet in
1993. Managers soon realized that, by using intranets, they could reduce many
of the problems associated with developing applications on a wide variety of
hardware platforms and networking configurations. Because the benefits were so
obvious, the regular financial justification process was waived for intranet
application development projects. The IS group that helps user departments
develop and maintain intranet applications increased its staff from three to
ten employees in 15 months.
Needham Interactive
Needham, a Dallas advertising
agency, has offices in various parts of the country. Needham discovered that,
in developing presentations for bids on new accounts, employees found it
helpful to use materials from other employees’ presentations on similar
projects. Unfortunately, it was very difficult to locate and then transfer
relevant ,materials in different locations and different formats. After doing
research on alternatives, the company identified intranet technology as the
best potential solution. Needham hired EDS to help develop the system. It
started with one office in 1996 as a pilot site. Now part of DDB Needham, the
company has a sophisticated corporate wide intranet and extranet in place.
Although the investment was “substantial”, Needham did not do a detailed
financial analysis before starting the project. David King, a managing partner
explained. “the system will start paying for itself the first time an employee wins a new account
because he had easy access to a co-worker’s information.”
Cadence Design Systems
Cadence is a consulting firm
located in San Jose, California. It wanted to increase the productivity of its
sales personnel by improving internal communications and sales training. It
considered Lotus Notes but decided against it because of the costs. With the
help of a consultant, it developed an internet system. Because the company
reengineered its sales training process to work with the new system, the
project took somewhat longer than usual.
International Data Corp., an IT
research firm, helped cadence do an after-the-fact financial analysis.
Initially the analysis calculated benefits based on employees meeting their
full sales quotas. However, IDC later found that a more appropriate indicator
was having new scales representatives meet half their quota. Startup costs were
$280,000, average annual expenses were estimated at less than $400,000, and
annual savings were projected at over $2.5 million. Barry Demak, director of
sales, remarked, “we knew the economic justification…would be strong, but we
were surprised the actual numbers were as high as they were.”
Questions:
1. Where and under what
circumstances is the “invest first, analyze later” approach appropriate? where
and when is it inappropriate? Give specific examples of technologies and other
circumstances.
2. How long do you think the
“invest first , analyze later” approach will be appropriate for intranet
projects? When (and why) will the emphasis shift to traditional project
justification approaches? (Or has the shift already occurred?)
3. What are the risks of going
into projects that have not received a through financial analysis? How can
organization reduce these risks?
4. Based on the numbers provided
for Cadence Design System’s intranet project, use a spread sheet to calculate
the net present value of the project. Assume a 5-year life for the system.
 |
| Where and under what circumstances is the “invest first, analyze later” approach appropriate where and when is it inappropriate |
Case 3 -Putting IT to Work at
Home Depot
Home Depot is the world’s largest
home-improvement retailer, a global company that is expanding rapidly (about
200 new stories every year). With over 1500 stories (mostly in the United
States and Canada, and now expanding to other countries) and about 50,000 kinds
of products in each store, the company is heavily dependent on It, Especially
since it started to sell online.
To align its business and IT
operations, Home Depot created a business and information service model, known
as the Special Projects Support Team (SPST). This team collaborates both with
the ISD and business colleagues on new projects, addressing a wide range of
strategic occur at the intersection of business process. The team is composed
of highly skilled employees. Actually, there are several teams, each with a
director and mix of employees, depending on the project. For example, system
developers, system administrators, security experts, and project managers can
be on a team. The teams exist until the completion of a project; then they are
dissolved and the members are assigned to new teams. All teams report to the
SPST director, who reports to a VP of technology.
To ensure collaboration among end
users, the ISD and the SPST created structured (formal) relationships. The
basic idea is to combine organizational structure and process flow, which is
designed to do the following:
• Achieve
consensus across departmental boundaries with regard to strategic initiatives.
• Prioritize
strategic initiatives.
• Bridge
the gap between business concept an detailed specifications.
• Result
in the lowest possible operational costs.
• Achieve
consistently high acceptance levels by the end-user community.
• Comply
with evolving legal guidelines.
• Define
key financial elements (cost-benefit analysis, ROI, etc.).
• Identify
and render key feedback points for project metrics.
• Support
very high rates of change.
• Support
the creation of multiple, simultaneous threads of work across disparate
time lines.
• Promote
known, predictable, and manageable work flow events, event sequences, and
change management processes.
• Accommodate
the highest possible levels of operational stability.
• Leverage
the extensive code base, and leverage function and component reuse.
• Leverage
Home Depot’s extensive infrastructure and IS resource base.
Online File W 15.11 shows how
this kind of organization works for home depot’s e-commerce activites. There is
a special EC steering committee which is connected to the CIO (who is a senior
VP), to the Vp for marketing and advertising, and to the VP for merchandising
(merchandising deals with procurement). The SPST is closely tied to the ISD, to
marketing, and to merchandising. The data centre is shared with non-EC
activities.
The SPST migrated to an
e-commerce team in Aughust 2000 in order to construct a Website supporting a
national catalog of products, which was completed in April 2001. (This catalog
contains over 400,000 products from 11,000 vendors.) This project requires the
collaboration of virtually every department in Home depot (e.g., in the
figure). Also contracted services were involved. (the figure in online file
W15.11 shows the work flow process.)
Since 2001, SPST has been
continuously busy with Ec Intivatives, including improving the growing Home
Depot online store. The cross departmental nature of the SPSt explains why it
is an ideal structure to support the dyanamic, ever-changing work of the
EC-related projects. The structure also consider the skills, strengtyhs, and
the weeknesses of the It employees. The company offer both the online and
offline training aimed at improving those skills. Home Depot is consistently
ranked among the best places to work for IT employees.
Questions:
1. Explain why the team based
structure at Home Depot is so successful.
2. The structure means that the
SPST reports to both marketing and technology. This is known as a matrix
structure. What are the potential advantages and problems?
3. How is collaboration
facilitated by IT in this case?
4. Why is the process flow
important in this case?
Case 4 -Dartmouth College Goes Wireless
Dartmouth College, one of the
oldest in United States (founded in 1769), was one of the first to embrace the
wireless revolution. Operating and maintain a campuswide information system
with wires is very difficult. Since there are 161 buildings with more than
1,000 rooms on campus. In 2000, the college introduced a campuswide wireless
network that includes more than 500 Wi-Fi (wireless fidelity: see chapter 6)
systems. By the end of 2002, the entire campus became a fully wireless, always
connected community – a microcosm that provides a peek at what neighborhood and
organizational life may look like for the general population in just a few
years.
To transform a wired campus to a
wireless one requires lots of money. A computer science professor who initiated
the idea at Dartmouth in 1999 decided to solicit the help of alumni working at
cisco systems. These alumni arranged for a donation of the initial system, and
cisco then provided more equipment at a discount. (Cisco and other companies
now make similar donations to many collages and universities, writing off the
difference between the retail and the discount prices for an income tax
benefit.)
As a pioneer in campuswide
wireless, Dartmouth has made many innovative usuages of the system, some of
which are the following:
• Students
are developing new applications for the Wi-Fi. For eample, one student has
applied for a patent on a personal-security device that pinpoints the location
of the campus emergency services to one’s mobile device.
• Students
no longer have to remember campus phone numbers, as their mobile devices have
all the numbers and can be accessed any where on campus.
• Students
primarily use laptop computers on the network. However, an increasing number of
Internet-enabled PDAs and cell phones are used as well. The use of regular cell
phones is on the decline on campus.
• An
extensive messaging system is used by the students, who send SMSs (Short
Message Services) to each other. Messages reach the recipients in a split
second, any time, anywhere, as long as they are sent and received within the
network’s coverage area.
• Usage
of the Wi-Fi system is not confined just to messages, students can submit their
class work by using the network, as well as watch streaming video and listen to
Internet radio.
• An
analysis of wireless traffic on campus showed how the new network is changing
and shaping campus behavior patterns. For example, students log on in short
bursts, about 16 minutes at a time, probably checking their messages. They tend
to plan themselves in a few favourite spots (dorms, TV room, student centre,
and on a shaded bench on the green) where they use their computers, and they
rarely connect beyond those places.
• The
student invented special complex wireless games that they play online.
• One
student has written some code that calculates how far away a networked PDA user
is from his or her next appointment, and then automatically adjusts the PDA’s
reminder alarm schedule accordingly.
• Professors
are using wireless-based teaching methods. For example, students armed with
Handspring visor PDA’s equipped with Internet access cards, can evaluate
material presented in class and can vote on a multiple-choice questionnaire
relating to the presented material. Tabulated results are shown in seconds,
promoting discussions. According to faculty, the system “makes students want to
give answers,” thus significantly increasing participation.
• Faculty
and students developed a special voice-over-IP application for PDAs and iPAQs
that uses live two-way voice-over-IP chat.
Questions:
1.In what ways is the Wi-Fi technology changing the
Dartmouth students?
2. Some says that the wireless system will
become part of the background of everybody’s life – that the mobile devices are
just an afterthought. Explain.
3. Is the system contributing to improved
learning, or just adding entertainment that may reduce the time available for
studying? Debate your point of view with students who hold a different opinion.
4. What are the major benefits of the
wireless system over the previous wire line one? Do you think wire line systems
will disappear from campus one day? (Do some research on the topic.)
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