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Page 1: Competitive Advantage

Using Information Technology for Competitive Advantage

Jolanta Zadlo & Gary Gray

MIS 480 GROUP PRESENTATION

Page 2: Competitive Advantage

IT and Competitive Advantage

Sustainability of Competitive Advantage

Case Studies Sabre GE

Conclusion

IT as a Competitive Weapon

Page 3: Competitive Advantage

Definition:Information Technology

Information Technology (IT) is the amalgamation of hardware, software, data, people and procedures that enables or inhibits business objectives depending on management’s involvement in IT.

Source: Why General Managers Need to Understand Information Technology, lecture notes, Lacity, 2002

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How the information revolution affects competition

Changes industry structure thereby altering the rules of competition

Creates competitive advantage by giving new ways to outperform rivals

Spawns whole new businesses

Source: How information gives you competitive advantage, Porter and Millar, 1985

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How IT creates a competitive advantage

Differentiate a product or service

Improve business processes (lower costs)

Change a business structure

Create new business

Source: IS 480 lecture notes, Lacity, 2002

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Competitive advantage comes from critical differentiators

Source: IS 480 lecture notes, Lacity, 2002

CriticalCommodities

Critical Differentiators

Useful Commodities

Eliminate/Migrate

Critical

Useful

Commodity Differentiator

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IT as a Competitive Weapon -Sustainability

Very few companies sustain their competitive edge over the long term

Sustainability occurs when it is difficult or impossible for the competition to respond

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

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IT as a Competitive Weapon -Sustainability

IT Resources-Easily Duplicated

• Capital for investment

• Proprietary technology

• Technical Skills

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

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IT as a Competitive Weapon -Sustainability

IT Resources-NOT Easily Duplicated

Managerial IT Skills

• Understanding business needs

• Collaborating with colleagues

• Managing market & technical risk of innovation

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

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IT as a Competitive Weapon -Sustainability

Sustainable Advantage

Lead Time Competitive Asymmetry

Pre-emption Potential

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

Supply System Analysis

Competitor Analysis

Project Life-cycle Analysis

1. How long before a competitor responds?2. Which competitors can/will respond?3. Will the response be effective?

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IT as a Competitive Weapon -Sustainability

3 Pillars Supporting Sustainable Advantage

• Lead Time• Information leaks• Followers take short cuts• Followers implement better solutions

• Competitor Analysis(Difficulty of competitor to respond or copy application)

• Supply system analysis• Market capture• Switching costs

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Case studies selected:

AmericanAirlines

General Electric Company

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Sabre Holdings Corporation Current Company

Background

S&P Fortune 500 Company $2.1B in revenues in 2001

TSG – “The Sabre Group”Traded on the NYSE – 1996Current Price – about $21

Headquarters – Dallas/Fort Worth, TX

Source: www.sabre.com

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Sabre Holdings CorporationCurrent Company Background

7,000 employees in 45 countries

Sabre connects more than 60,000travel agency locations worldwide, providing content for 400 airlines (complete flight data, seat maps, etc) , 55,000 hotel properties (room availability, type, price), 52 car rental companies, nine cruise lines, 33 railroads and 229 tour operators.

Source: www.sabre.com

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Sabre Holdings CorporationFinancial Data

Revenues from operations declined 19% in 2001 due to 9/11 events and lower US and worldwide travel volumes, but were more than compensated for by revenue from outsourcing to EDS, profits did not fare as well.

Source: Sabre’s 2001 Summary Annual Report

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

1997 1998 1999 2000 2001

Revenues in Billions

$0

$50

$100

$150$200

$250

$300

$350

1997 1998 1999 2000 2001

Earnings in Millions

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Sabre Holdings CorporationFinancial Picture

Source: Sabre’s 2001 Summary Annual Report

2001 Revenues by Business

Travel Marketing & Distribution

78%

AirlineSolutions

9%

Travelocity11%

GetThere2%

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Sabre Holdings CorporationInformation Technology

Both Carol Kelly, Senior VP and CIO, and Craig Murphy, Senior VP and CTO report to the CEO

Sabre outsourced its mainframe and data center to EDS. However, Sabre has retained a sizeable investment in IT.

Source: Interview of Jim Menge, VP Technology Sales, Sabre

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Semi-

Automatic

Business

Research

Environment

What is Sabre

Source: Computerworld, Technology Takes Flight, Sep 2002

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Source: Computerworld, Technology Takes Flight, 9/02

American Airlines developed Sabre to automate the process of reserving airline seats.

IT to Improve Business Processes:

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American Airlines: improves a business process

1959 – American Airlines (AA) and IBM sign a contract for the joint development of a real-time reservation system that combines in a centralized electronic unit, 2 basic reservation records – the passenger name record (PNR) and the seat inventory. AA spends $150M on the development of the system. Sabre was based upon technology created by MIT for DOD.

Source: Data Management, Sep 1981 & Computerworld Mar 1999

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American Airlines: improves a business process

AA’s reservation process used a system based on computer cards and teletypes and required the efforts of 12 people, at least 15 steps and up to 3 hours to record

a roundtrip reservation. The error rate was 8%.

Sabre reduced costs and the error rate.

Source: www.sabre.com

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1960 – American Airlines (AA) installed the first Sabre system, a computer reservation system (CRS). Represented state-of-the-art technology and processed 84,000 calls per day. Research, development and installation cost $40 million with an investment of 400 man-years of effort.

Source: www.sabre.com

American Airlines: improves a business process

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1964 – AA completes cutover to Sabre with a coast to coast network in the US.

Sabre is the largest, private real-time data processing system.

Source: www.sabre.com

American Airlines: improves a business process

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Competitive Edge

Competitive advantage from process change

Source: www.sabre.com

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Competitive Edge

AA saved 30% of its investment in staff alone

Sabre delivers an error rate of less than 1%

Sabre creates a competitive edge that lasts for 5 to 7 years

Source: www.sabre.com

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Competitive Edge

Other CRS providers today: Apollo – rolled out by United in 1976 Worldspan – Delta, Northwest and TWA Amadeus – largest foreign owned CRS

Sabre continues as the industry leader today

Worldspan is the only airline owned CRS

Source: www.sabre.com and BTMC records

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Sabre System History – 1970s

1972 – Sabre system upgraded to IBM 360s

1976 – Sabre system first installation

in a travel agency – by year end 130 locations

and captured about 86% of the market

United Airlines introduces Apollo

1978 – Sabre stores 1M fares

Source: www.sabre.com

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Sabre System History – 1980s

1981 – Sabre has a slight market share advantage over Apollo

The competitive edge has all but disappeared 1981 – AA introduces the first airline frequent flyer program

1984 – Sabre introduces low-fare search engine – a service unmatched in the industry

Sources: Business Week, Aug 1982, Direct Marketing, Jul 1983 and www.sabre.com

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Sabre System History – 1980s

1985 – AA allows travel agencies to use personal computers to tap into the Sabre system via computer online services to access airline, hotel and car rental reservations

1986 – AA/Sabre installs the industry’s first automated yield management system

1988 – Sabre system stores 36 million fares

Source: www.sabre.com

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Sabre System History – 1980s

1987 – With airlines in their 8th year of deregulation, information and transaction processing has become more profitable than selling seats. AA’s Sabre System produced pretax margins of 30% vs. 5.2% percent from tickets.

Source: Business Week, 1987

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Sabre System History – 1980s

1988 – Sabre system stores 36 million fares

1989 – A computer foul-up shut down AA’s Sabre ticketing system for 12 hours, apparently the result of a glitch written into the system. The system failure left 14,000 travel agencies and a large part of AA without flight information.

Lesson ?

Sources: New York Times and Business Week, 1989

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Sabre System History – 1990s

1995 – Sabre begins to prepare for Y2K – software is distributed to 40,000 travel agents in 1998. Y2K costs estimated at $78M.

1996 – Sabre names its first CIO

Source: www.sabre.com & Computerworld, May 1996 and Computerworld, Mar 1998

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The Web Threat

Airlines begin to focus on the Web as a means to further reduce their

distribution costs

Source: www.sabre.com

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A New Way to Cut Costs

1995 – AA and all major US carriers reduce travel agency commissions on domestic flights. Commission is capped at $50.

Additional reductions are made in 1997 (% decreased from 10% to 8%), 1998 (international commissions capped at $100), 1999 (% decreased to 5%), 2001 (domestic caps reduced to $20) and 2002 (commissions eliminated)

Source: www.sabre.com and BTMC records

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Sabre System History – 1990s

1996 – Sabre becomes a separate subsidiary of AMR and AMR releases 18% to be publicly traded (total spin-off in 2000)

Source: www.sabre.com

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Sabre System History – 1990s

1996 –– Travelocity.com, currently the industry’s leading online consumer travel website is launched.

Source: www.sabre.com

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Sabre System History – 1990s

By 1998 Sabre had evolved into a global distribution system (GDS) for travel reservations connecting more than 30,000 travel agents and 3 million online customers with 400 airlines, 50 car rental companies, 35,000 hotels and dozens of railways, tour companies and cruise lines. About 1% of all airline tickets are purchased on the web in early 1998.

Source: Computerworld, Sep 2002 & Forbes, Apr 1998

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Sabre System History – 1990s

1999 – Sabre®Virtually There™, a web based system that provides travelers itinerary and destination info via the internet

Source: www.sabre.com

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The Web Threat

1995 – Sabre considers development of the first corporate online booking tool – BTS. The project is incubated for 2 to 3 years.

1997 – Development of the BTS begins.

1998 – BTMC agrees to beta test Sabre’s BTS for Boeing travelers.

Source: interview and BTMC records

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Online Booking

1998 – Sabre is unable to expand BTS to be a multi-CRS system.

1999 – BTMC terminates agreement with Sabre and signs with small startup firm – Internet Travel Network for a multi-CRS system.

BTS is available today in a Spanish version which is still in use today.

Source: BTMC interview and BTMC records

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Online Booking

2000 – Sabre acquires GetThere.com, formerly Internet Travel Network for $757M. GetThere’s online product is currently the leading provider of online booking solutions. Purchase completed to gain customer base and keep competitors from purchasing.

Sources: www.sabre.com, interview & Computerworld, Aug 2000

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The Web Threat

Sabre’s recent response to the web which threatens its core business model

- Sabre signs deals with Hotwire.com and Priceline.com to provide key technology – both companies are also competitors of Sabre’s Travelocity.com

Source: Computerworld, Aug 2000

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The Initial Outsourcing

In August 1996, Sabre signed a 7 year outsourcing deal which transferred responsibility for its travel reservations network. A partnership of Paris-based airline network SITA and Atlanta-based Equant essentially purchased the network for $450M for 7 years. Sabre transferred 80% of its network engineers to SITA.

Source: Computerworld, December 1997

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Outsourcing a mature product

In July 2001, Sabre signed a 10 year, $2.2B outsourcing contract with EDS. EDS purchased Sabre’s IT infrastructure assets and data centers and Sabre’s airline technology outsourcing business. Over 4,000 Sabre employees transferred to EDS. This transaction represented $600M in revenue to Sabre.

Source: Computerworld July 2001 and interview

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The Future

Sabre continues to develop and release new products on an ever increasing pace.

Continued change required to maintain customer satisfaction. Revenues from the traditional CRS/GDS model must be replaced by new lines of business.

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1980’s: Killer Application• AA/UA-Reservation Systems• American Hospital Supply-Online ordering system• Frito-Lay-Handheld devices for sales

Early 1990’s: Re-engineering

• Redesigning business processes around technology

Mid 1990’s: Information Management• Knowledge Management• ERP• CRM

Success with IT: Strategies

http://www.cio.com/archive/050101/davenport_content.html

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Late 1990’s: e-Commerce

Today• e-Commerce is not enough• IT investment in the business core (touches customer)• Business commitment• Commitment to change (continually re-invent and never rest)• Using multiple technologies and management approaches (not

just one)• Company must excel in front office(e-commerce, CRM) , back

office (ERP), and data warehousing, mining, and KM• Information focus (to make smart decisions)

Success with IT: Strategies

http://www.cio.com/archive/050101/davenport_content.html

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It’s All About “E”

Overview Strategy e@GE Summary

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Case Study:General Electric

• Company Overview• Digitization Strategy• Examples

• Buy Side• Plastics• Appliances• Power Systems• Aircraft Engines

• Sell Side• Make Side

• Summary

e-business Is Business Just Simpler, Faster, and Better

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• Formed in 1892• Only company part of the Dow Jones's Industrial Index since the

Index’s debut• 67,588 patents, 2 Nobel Prizes and numerous other honors• Operates in more than 100 countries and employs 313,000 people

worldwide • GE is considered to be one of the largest and most diversified

industrial corporations in the world

General Electric:Company Overview

www.ge.com

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General Electric:Company Overview

• Short-cycle businesses contributed approximately 20% of GE's net earnings in 2001• Consumer Products (Lighting & Appliances) • Plastics • Industrial Systems• NBC• Specialty Materials

• Long-cycle businesses contributed approximately 40% of GE's net earnings in 2001• Medical Systems• Power Systems • Transportation Systems• Aircraft Engines

• Financial services contributed approximately 40% of GE's net earnings in 2001

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• Before 1999 - IT at GE was non existent

GE – Digitization Strategy

• 1999 - Jack Welch orders each business to “Destroy your business/ Grow your business”

• Use information technology to “create a leaner, faster, more customer focused company, accelerate high margin, capital efficient growth.”, Jeff Immelt, CEO

• 2001- GE Top e-business innovator (eweek)

www.ge.com

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IT Spending

2000 - $2.5 billion2001 - $3.0 billion2002 - $3.5 billion

GE – Digitization Strategy

"You won't see one ounce of slowdown in tech spending.” Jack Welch 1/2001

Gary Reiner, CIO

http://www.eweek.com/article2/0,3959,94717,00.asp

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GE – Digitization Strategy

• Negotiate

– e-Auctions

–Deflation

• Transact –

Productivity – eTransactions – Control

Buy

• Eliminate Intermediaries–Speed– Unit Cost

Reduction –Streamline processes

Make

• Make the Customer More Productive– Comparative

Performance Data– Customized Service (Availability/Order Service)

• Transaction Productivity

Sell

Productivity (“Workflow”)

More Share/HigherMargin

GE Internal Presentation

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Buy smarterProcess more efficiently

Sell more

GE ValueCustomer ValueBuy smarter

Process more efficientlySell more

e-Business Value

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Digitization provides ways to improve our customer interface and work on our own internal productivity at the same time. It is just beginning. Our investments in information technology will grow about 15% this year. It is really going to help us transform the cost base of GE. Its going to help us buy better. Its going to help us interface with customers better. But primarily its going to help us in terms of the inner workings of GE make us more efficient, leaner, and closer to the customer."

-- Jeff Immelt, Chairman and CEOCustomer City Swings, April 2001

e@GE

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CEO

BDLeader

MarketingLeader

CIO

• External or Internal• Internet Generation• Creative,

Entrepreneurial• Start Up Experience• Marketing/IT

Background

• High Level Leader• Knows the Business• Track Record of Delivering• Well Respected - Great Team

Player/Influencer• Understands Commercial &

Operations• Has or Can Play on Business

Leader Staff

e-BusinessLeader

• External Hire• e-Commerce Industry

Experience• Business Savvy• Technical Expertise

DYB.com/GYB.com LeaderFocus: Destroy Your

Business/ Grow Your Business

CWC.com LeaderFocus: Enhance & Build

Your Customer Web Center

Marketing SalesOperation

s

Cross Functional Team

Marketing Sales Operations

Cross Functional TeamTechnical

FunctionalityBack End

Infrastructure

Chief Architect.Com Technical Team

Buy Sidee-Commerce

Leader

Other e-Business Functional

Leaders

e-Business Organizational Approach

e-Business Steering Committee

• CEO• e-Business Leader• CIO• Marketing Leader• BD Leader

GE Internal Presentation

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e@GE Statistics Sell

0

20

40

60

80

100

120

140

1999 2000 2001 2002

Dol

lars

(bill

ions

)

On Line Revenue

Overall Revenue

Profit (overall)

Online Revenue as a percentage of total revenue

02468

10121416

1999 2000 2001 2002

%

After a year of trying web sales, “it really hadn’t changed the world.” Gary Reiner, CIO GE, Forbes 4/30/2001

GE Annual Reports

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e@GE - SellPlastics-Overview

Company• Leading global manufacturer and distributor of plastics resins

and plastics, including polycarbonate, ABS, SAN, ASA, PPE, PC/ABS, PBT and PEI resins.

• 10K employees• $5.3 Billion in sales

CustomersAutomotive (i.e. Ford), computers (i.e. Dell), telecommunications, appliances, optical media, packaging, and building and construction

www.geplastics.com

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• 1994 - 1,500 pages of corporate literature, product information, press announcements, photographs, and design guides on the Net

• 1997 - First to sell resins on the web

• Today• industry's leading e-Commerce Web site• speeding up and simplifying the whole range of customer services• Voted best of the web (Forbes 9/18/2002)• Full service portal • 200,000 registered users, 20K visits/week, 2,000 pages of online material

e@GE - SellPlastics-Overview

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gepolymerland.com

• Web site designed to give an easy, super-fast way to manage a resin business

• Provides information needed to stay on top of your business• Available 24 hours a day, seven days a week.

“it's all about speed, efficiency and making every minute count”www.gepolymerland.com

e@GE - SellPlastics-Overview

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• Interact• Discussion groups• Chats• Career center• Calendar• Yellow Pages

• Research• Material selection database• Technical Tips and case studies• Problem solving guidelines• Technical inquiries• Literature online

• Buy• Real time orders online FAST• Shipping confirmation in minutes• Track and trace shipments• MSDS and Certifications online• secure Company information

• Design Services• Part/toll design assistance• Computer-aided engineering services• Design questions

e@GE - Sellgepolymerland.com

www.gepolymerland.com“it's all about speed, efficiency and making every minute count”

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0

1

2

3

4

5

6

7

8

9

1995 1996 1997 1998 1999 2000 2001 2002

Reve

nue

$ (B

illio

ns)

Online Revenue

Overall Revenue

Profit (overall)

-35-30-25-20-15-10-505

101520

1996 1997 1998 1999 2000 2001%

% Revenue Growth% Profit Growth

e@GE - SellPlastics-Performance

14% growth primarily attributed to e-business initiatives

2001 GE Annual Report & http://www.line56.com/articles/default.asp?ArticleID=4086&ml=3

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• Information on the net helps customers operate more productively and save money• product information• warehouse inventory• shipment status

• 24x7 convenience

Chemical Week 5/10/2000

e@GE - SellPlastics-Summary

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• Beyond transactions-long term value creation• Aim to draw in engineers, plant managers, and others

• ColorXpress: allows customers to match and order color chips;• Vendor Managed Inventory (VMI): uses a proprietary online monitoring technology to monitor

storage silos and stabilize order patterns for customers• Design Solution Center:offers a full range of online technical software tools to aid in application

development.

• Content encourages repeat visits• Customer support/technical assistance• Educational offerings (online seminars)

• 500 events in 2001• multilingual• reached 15,000 customers

• Continually broadening its interactive base of knowledge

www.geplastics.com

e@GE - SellPlastics-Summary

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e@GE - SellAppliances-Overview

Company

• GEA is nearly a $6 billion business in North America, Europe, Asia and South America.

• Each year GEA sells more than 15 million appliances in 150 world markets under the Monogram®, GE Profile™, GE®, and Hotpoint® brand names.

www.geappliances.com

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e@GE - SellAppliances-Overview

• refrigerators• freezers• ranges• dishwashers• washing machines

• dryers• microwave ovens• speed cooking ovens• room air conditioners• water filtration• softening and heating systems

Products

Customers

RetailersIndividuals

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e@GE - SellAppliances-Overview

Kiosk based virtual inventory model

• Program allows customers to walk into a Home Depot or Wal-Mart store, buy an appliance online at a kiosk, and select a delivery date/time

• Web based systems at GE warehouses help coordinate fulfillment and promise deliveries within 15 minutes of customer specification

• Manufacturer assumes all warehousing, delivery, and installation duties

• Goal: Making channel partners more successful“direct ship is going to be the differentiating factor for competition in the future. There is too much redundancy in the way that business is conducted.”

Larry Johnston, CEO GE Appliances Wolf, Alan, “GE’s Johnston: Why the Web is Imperative,” Twice 10/23/2000

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e@GE - SellAppliances-Performance

0

1

2

3

4

5

6

7

1995 1996 1997 1998 1999 2000 2001

Dolla

rs (b

illio

ns)

Overall Revenue

Profit (overall)

-20

-15

-10

-5

0

5

10

15

1996 1997 1998 1999 2000 2001%% Revenue Growth

% Profit Growth

GE Annual Reports

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e@GE - SellAppliances-Summary

• Retail Win• No capital commitment by merchant• Registering sales of products that are not physically there• Elimination of inventory and delivery costs

• Customer Win • Precision fulfillment system

• GE Win• Increase revenue

“Something as un-sexy as logistics has become the game changer.” GE Spokesperson

Wolf, Alan, “Wal-mart Enters Majap Program with GE Appliance Pilot Program,” Twice 9/4/2000

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e@GE - SellAircraft Engines

• B2B web center that enables real-time transactions with 300 customers 24x7• Catalog of 250,000 parts• Order entry• Inventory status• Order/shipping status• Account information

• Value added services• Enhancing customer productivity• Saved parts list• Configuration histories• Advanced search tools• On-line troubleshooting using fiber optic video

http://www.cio.com/sponsors/050100_ebiz_story2_side5.html & http://www.forbes.com/best/2000/0717/038s01.htmlCompetitors Pratt & Whitney or Rolls Royce have yet to develop anywhere near as effective a Web Strategy as GE.

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e@GE - SellPower Systems

Turbine Optimizer• Web based tool• Compares turbine performance with same models across the world• Shows dollar value of improvement• Ability to schedule service call for improvement

“It used to take 2 weeks to analyze a problem, now it only takes an hour.”

http://www.forbes.com/best/2000/0717/038s01.html

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e@GE – MakeInternal Processes Overview

• Eliminate manual processes

• Eliminate paper generating processes

• Increases volume per sales rep

• Reduce back office processes and increase front office face time with customer

GE Internal Presentation

“Every process we can digitize will help reduce our costs and further increase our speed -- both key competitive advantages in today's marketplace.”

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e@GE – MakeInternal Processes Overview

• Finance • HR

• Employee Evaluations• Employee Applications

• Sales• invoicing• reconciling

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e@GE – MakeInternal Processes Overview

• Travel• Booking• Expensing• 2001 savings: $200 million in improved

efficiencies and reduced travel• Support Central• Education

GE Internal Presentation

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e@GE – MakeInternal Processes

Stakeholders• Employees

• Management

• Stockholders

• Customers

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e@GE – MakeInternal Processes

2000 - $1.5 billion savings on streamlined internal processes

Future - ~$10 billion in savings

e-Make is about streamlining processes and reducing unit costshttp://www.pcmag.com/article2/0,4149,33527,00.asp

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e@GE – Buy

Stakeholders• Management

• Stockholders

Page 79: Competitive Advantage

Negotiate e-Auction “Everything”

GE Internal Presentation

e@GE – Buy

• real-time online purchasing auction for both incumbent and non-incumbent GE suppliers

• reverse auction • allows GE purchasing managers to monitor competitive

pricing and drive down total costs• $3 billion worth of goods and services on auction (2000)• businesses achieved 10-20% price deflation across the board

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e@GE – Buy

GE Internal Presentation

TransactCapture Digitally Capture All PO’s, Invoices, Payments

• easier to obtain current data• fewer errors in purchase orders• quicker turnaround reconciling bills

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Date % Date % Date %NBC J an-01 100% Dec-01 85% Sep-01 93%APPLIANCES Mar-01 100% May-01 100% Dec-01 100%LIGHTING May-01 95% J un-01 90% J un-01 100%AIRCRAFT J un-01 100% J un-01 100% J un-01 100%TRANS J un-01 100% Dec-01 100% Dec-01 100%PLASTICS Dec-01 100% Dec-01 100% Sep-01 100%INDUSTRIAL Dec-01 95% Dec-01 90% Dec-01 90%MEDICAL Dec-01 95% Dec-01 95% Dec-01 95%CAPITAL Dec-01 85% Dec-01 90% Dec-01 75%SUPPLY Dec-01 80% Dec-01 90% Oct-01 100%POWER Dec-01 65% Dec-01 80% Dec-01 70%

e-P0 e-Inv e-Pay

GE Internal Presentation

e@GE – BuySupplier Workflow

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– Implement Automated Workflow Approvals– 5% on $20B = $1B

Contract Adherence– Establish One Data Source for Pre-Negotiated

Contracts– 3% on $20B = $600M

Productivity – Streamline Sourcing Process– 5% of 3000 people = $20M

Constrict Usage

e@GE – Buy

GE Internal Presentation

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e@GE – BuySummary

• Savings2001: Anticipated $600 million in savings

• Transactions2000: $6 billion transactions

2001: $15 billion transactions Future: $30 billion transactions

e-Buy is about buying smarter and processing more efficientlyhttp://www.pcmag.com/article2/0,4149,33527,00.asp

Page 84: Competitive Advantage

Buy smarterProcess more efficiently

Sell more

GE ValueCustomer ValueBuy smarter

Process more efficientlySell more

e-Business Value

Competitive Advantage through differentiation (value added customer services) and cost reduction

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e-Business strategy continues to build on the business model that has enabled the company to outpace S&P 500 earnings growth through every cycle

http://www.ge.com

e@GE

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e@GE

Digitization mandate - Straight from the top

IT – leveraged to cut costs and differentiate

Differentiation • Online tools and services• Increased front office operations

“Digitization is changing our relationship with our customer. At the customer for the customer (ACFC)-the way that we differentiate.”

http://www.ge.com

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IT as a Competitive Weapon -Sustainability

Sustainable Advantage

Lead Time Competitive Asymmetry

Pre-emption Potential

“IT as a Basis for Sustainable Competitive Advantage,” Feeny & Ives

Supply System Analysis

Competitor Analysis

Project Life-cycle Analysis

Do our case studies have sustainable advantage ?

SabreGE (Plastics, Appliances)

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Web BusinessStaying Power

• Simplicity• Applying traditional business thinking to a new channel• Use web to improve business and create valuable services• Awareness of customer needs• e-Business is a constantly moving target• Need for sound relationships

http://www.cio.com/archive/120101/power_content.htmlDavidson, Stephen, “B2B Exchaanges:Lessons from the Trading Pit,” Journal of Internet Law, 4/2002, v5 i10 p1(10)

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IT as a Competitive Weapon -Summary

IT can be used as a competitive weapon through cost reduction and differentiation

Very few companies sustain competitive advantage using IT

IT projects need to be evaluated for “sustainability’ in addition to traditional risk

e-Business is a constantly moving target

Page 90: Competitive Advantage

Future of IT

Competitive Advantage?

Competitive Necessity?

or