1、IT StrategyFebruary 24,2000Case Study of a Recent Client ExperienceRob Trollinger,Principal,DallasChris Wisler,Manager,AlexandriaKimberly Brown,Associate,AlexandriaA.T.Kearney1/8510Color/2Todays discussion uBackground of CompanyuCompany IT OverviewuCause for ActionuIT Strategy ApproachuApplication A
2、rchitectureuTechnical ArchitectureuEstablish the IT Program OfficeuOrganizational Effectiveness and IT AlignmentuSummaryA.T.Kearney1/8510Color/3Background of companyA.T.Kearney1/8510Color/4uBegan in 1909 as a partnership between an innovative chemist and a businessmanuPioneering work in leather tann
3、ing uBest known for expertise in acrylic chemistry uEssential component to detergents,diapers,cell phones,industrial coatings,and more u50 manufacturing,research,and technical facilities worldwide uSales in 100 countries,totaling$4 billion annuallyCompany ACompany BCompany A announced their intended
4、 merger with Company B in 1999u1848,founding uLargest and most recognized business for a particular consumer productuMajor supplier of basic inorganic chemicals derived from saltuEssential ingredients in CDs,newspapers,magnetic tapes,sports equipment,and moreu36 mining and processing facilities,68 c
5、hemical manufacturing,research,and technical facilities worldwideuSales total$2.5 billion annuallyA.T.Kearney1/8510Color/5 Drive the short-term value Exceed the markets expectationsIntegrate the Organizations as Seamlessly as PossibleuDevelop and communicate a shared strategic agenda uDefine organiz
6、ation structures,key business processes and technology platform/architectureuSelect leaders and staff positionsuDevelop metrics and budgetsuIntegrate the business Integrate day-to-day operations Position for the future growthAchieve Business Value Goals as Quickly as PossibleuAchieve$200 million of
7、savings within 12-18 months(running rate by 2001)Ensure customer retention Corporate Center rationalization Administrative overhead reduction Sourcing/Procurement savings Product line and operations rationalization Manufacturing productivity and supply chain improvements Reduction in technology cost
8、s The focus of the integration was to quickly achieve operational synergies while combining the organizations to support top line revenue growthA.T.Kearney was asked to structure,drive and manage the entire integration process for what would become one of the largest specialty chemical companiesA.T.
9、Kearney1/8510Color/6Latin America and Asia-Pacific Region Operations:10%ofsales20manufacturingfacilities10distributionsitesNorth American Region Operations60%ofsales60manufacturingfacilities230distributionsites(1)While the potential source of the synergies were somewhat clear,smooth and timely integ
10、ration of the two companies was less assuredChallengesuSome manufacturing processes and technologies were incompatible between the two companiesuCombining two companies with both direct product overlap uAcquiring company was more of a“intermediates producer”and the acquired company was more of a“for
11、mulator”uSignificant facilities consolidation opportunitiesuDistribution consolidation and improvement required changing the business model and the mindsetStandard lead timesStandard service levelsuSignificant customer overlapuSignificant EH&S issues needed to be addressed,competing away scarce capi
12、tal resourcesEuropean Region Operations:30%ofsales40manufacturingfacilities60distributionsitesA.T.Kearney1/8510Color/7After an accelerated integration program,the merger was deemed a success by the CEO as well as the analyst communityu“By the end of 3Q,the new company had achieved cost reductions of
13、$100MM on an annualized basis,three months ahead of schedule.”Morgan Stanley Dean Witteru“Already,the company has achieved a$100MM annual run rate in cost savings ahead of schedule”Janney Montgomery Scottu“The integration process is running smoothly and in fact better than expected achieving a$100 M
14、M lower run rate”J.P.Morgan Securitiesu“The integration efforts continue to track ahead of plan”Deutsche Banc Alex Brownu“Considering the steep increase in raw material costs,the new company was able to meet expectations with its rapid integration of the acquired companys operations”Brown Brothers H
15、arriman A.T.Kearney1/8510Color/8PerspectiveExternal FocusInternal FocusIncrementalTransformingValue Creation(P/E Ratio)New Business ModelNew SegmentsNew TechnologiesAcquisitionsShare GainTechnology ImprovementGeographic ExpansionPortfolio ManagementWork RedesignSupply ChainOperating Excellence2-3%Sa
16、les Growth4-5%Sales Growth6-8%Sales GrowthFollowing the integration,the CEOs Agenda is to double the rate of growth while maintaining high levels of profitabilityCost improvement,customer service and retention and e-business have been identified as key areas of focusA.T.Kearney1/8510Color/9uRapid as
17、similation of acquisitions with limited additional financial staffuGlobal shared servicesuIT provides a strategic advantage in support of growth initiativesTarget CapabilitiesuGlobal processes and metricsuInterim information on sales,profitability and cost of operationuAutomation of routine processe
18、s and transactionsuFinancial staff is aligned with the businessuContinuous launch of service offerings that cannot be easily matched by competitorsuQuality built into an automated processes uHumans manage the relationship not transactionsuIntegrated supply chain network(S&OP process)across multiple
19、enterprisesuInventory commitment using production,sales and balancesuAbility to reach customers globally without a local presenceGrowth/AgilityStrategic ImperativeCost ImprovementCustomer Service&Retentione-BusinessNewCos business strategy will place additional demands on the entire organizationA.T.
20、Kearney1/8510Color/10Company IT OverviewA.T.Kearney1/8510Color/11Finance/Back OfficeDemand PlanningSupply Chain&Customer ServiceHuman ResourcesClient/Server(Windows NT or Unix)High-level ProcessesIntegratorSAPISGeneral LedgerOrder History(Focus DB)Transportation ManagementRailmaxManufacturingPlannin
21、gTransport SafetyOrderingTeserac(HR)InfiniumHRFinancial ReportingOther HR/Payroll SystemsManufacturingQuality SystemsCurrent transactional systems are complex,reside on multiple platforms and are integrated through a network of interfacesAS/400MainframeA.T.Kearney1/8510Color/12Intrinsic manual proce
22、sses result in a high cost effort that cannot support the speed of todays e-business environmentGrowth/AgilityStrategic ImperativeuLack of automation prohibits additional workforce leverageuSystems are running out of physical capacityuIncremental improvement mindset limits strategic developmentObser
23、ved Key ThemeCost ImprovementCustomer Service and Retentione-BusinessuFocus is on reconciling balances and correcting errors and not root cause error preventionuProcesses(especially billing)are manually intensiveuGlobal processes are desirable but difficult to implement consistently uTransaction sys
24、tems are becoming increasingly difficult to maintainuSpecial customer requirements and services(e.g.SOMI)are implemented but at a relatively high cost uInspection of errors protects/masks the customer from errors inherent in the systemuManual intervention presents a barrieruBusiness information is n
25、ot easily assimilateduQuality of global customer information is suspectA.T.Kearney1/8510Color/13Roughly 72%of the IT budget is spent on maintaining current service levels and infrastructureTo maximize business value,we need to shift the spending from maintenance to business development and long term
26、 IT support and infrastructurePercent of IT Spending by CategoryIT Support&Infrastructure2%Maintenance72%Business Development19%Non-discretionary7%A.T.Kearney1/8510Color/14FunctionsCurrentLimited Point Source SolutionsPoint Source Best of Breed SuiteorLegacy SystemsProposedA future vision of the ent
27、erprise architecture must seamlessly and efficiently integrate core business processes in an e-business environmentEvolving Strategy:AIM,MicrosoftIBM AS/400,NT,?CompaqCompaqDigital,IP,ExchangeSAPJDEPeopleSoftStandardized,Low Cost,Mixed after mergerOracleProcesses of Strategic Value and Competitive A
28、dvantageOperations and Transaction Processes(Low Cost)InfrastructureData,MiddlewarePlanningISMOptimizationCRMHR/PayrollMainframeMid-range,Client/ServerDesktopsLaptopsVoice/Data,Networks,EmailApp.InterfaceData Mgmt Customer Facing e-Business SolutionsPRISM/Supply Chain SystemsProcurement LogisticsMan
29、ufacturing Operations Order Billing A/R A/P G/L ReportingMiddlewareA.T.Kearney1/8510Color/15Cause for ActionA.T.Kearney1/8510Color/16Information Technology StrategyuExploitation of current product&customer base through geographic expansion,new services&cross sellinguExtension of the traditional supp
30、ly chain beyond current customer and supplier baseuFormation of partnerships and alliancesuAdoption of new value chain models exploiting todays technologyuGlobal management and measurement processesuContinuous cost improvementPossible Business Unit ResponseAcquisitionsShared ServicesGlobalizatione-B
31、usinessContinued industry consolidationSupply Chain Value NetsBusiness Model RevolutionPace of Technology ChangeKey Business Change DriversInformation technology must reinvent itself to develop capabilities that deliver substantial business value at the pace of todays business environmentAlign and S
32、upportAn updated IT strategy is necessary to align the organization and its service offerings to business unit requirements and operating modelsA.T.Kearney1/8510Color/17Corporate AgendaIT Strategy Alignment68%Revenue Growth11%Return on Net AssetsuAssume leadership role in design&implementation of cu
33、stomer enabled processes to promote scalabilityuLeverage e-business technologiesuDevelop data mining techniques to leverage customer information leading to increased sales uInstitute a program management approachProfitable&Sustainable GrowthOperational ExcellencePost-Merger IntegrationuContinuous de
34、sign of new processes and service offerings to promote customer intimacy and service excellenceuImplement low cost high availability infrastructureuSimplify company and customer compliance with regulationsuContinue migration to Company As applicationsuRapid deployment of new processes and technologi
35、es to enable cost initiatives uRapid application development and deploymentE-business strategyCorporate ObjectivesLinking the strategy to the CEO agenda reinforces ITs commitment to be a high value service partnerA.T.Kearney1/8510Color/18Business StrategyIT StrategyBusiness MissionScopeCompetenciesG
36、overnanceIT MissionArchitectureCompetenciesGovernanceAlignmentuAlign the IT organization to meet business unit requirements of the new CompanyuDevelop and communicate the application and technical architecture directionuReplace the current technical“roadmap”with a comprehensive and specific deployme
37、nt flight plan depicting timing for replacing applications and technologies and implementing process/service changes uImplement a program management process to determine IT investment priorities&set IT directionThe IT strategy aligns with business strategies to define matching priorities,complementa
38、ry capabilities,and compatible organization dynamics IT Strategy OutcomesA.T.Kearney1/8510Color/19IT Strategy ApproachA.T.Kearney1/8510Color/20The IT Strategy is comprised of an IT vision,strategy and deployment plan that will enable rapid delivery of cost effective IT products and servicesGap to Cl
39、oseCompe-tenciesArchi-tectureGover-nanceIT-Future StateCompe-tenciesArchi-tectureGover-nanceDeployment PlanCompe-tenciesArchi-tectureGover-nanceBusiness StrategyStrategy Development ProcessIT Strategy DeliverableSynthesesIT StrategyIT VisionCore CompetenciesApplication&Tech.Architecture DirectionSel
40、f Funding Investment PlanGovernance ProcessesDeployment Strategy and TimingFilter/PrioritizeuCorporate StrategyuBusiness Unit StrategiesuBoundaries from Executive CouncilA new CIO was brought in to champion the effort while becoming the IT Change AgentIT-Current StateA.T.Kearney1/8510Color/21A set o
41、f guiding principles will allow us to“rethink”the current way of doing business as we progress our strategy development processuThe applications and technical infrastructure must be aligned with business strategies and create substantial shareholder valueIT will focus its energy on competencies that
42、 are results driven and add significant business valueOur goal should be to deliver project results in half the time and half the cost(time to market is essential)IT budget will be owned and driven by the business for discretionary projectsuThe organization will adopt a virtual and collaborative app
43、roach to address business problemsuThe future state will drive our strategy design;how we do things today may influence our future but there are no sacred cowsuWe must provide significant growth opportunities for our people to attract and retain a highly skilled and motivated staffuWe will share cle
44、ar,unified communications at every level led by IT Leadership TeamA.T.Kearney1/8510Color/22Four parallel workstreams will contribute to development of the IT vision,strategy and deployment planOrganizational Effectiveness and IT AlignmentEstablish the IT Program OfficeApplication ArchitectureTechnic
45、al ArchitectureuHow should the organization be aligned to the businesses?uWhat competencies should be developed to meet the challenges of todays business climate?uWhat specific application suite will best meet transaction processing requirements?uWhat platform(s)is most effective for the chosen appl
46、ication suite?uHow should we support the companys e-business requirements?uWhat process is required to prioritize and manage the IT portfolio?uHow should IT best involve senior management and the broader organization in the IT process?IT Strategy ProjectA.T.Kearney1/8510Color/23Application Architect
47、ureA.T.Kearney1/8510Color/24The applications architecture will result in an ERP“backbone”vendor selection and provide guidance and direction for all other applicationsAll ApplicationsCustomersSuppliersPackageselectedImpactassessmentDirection/valuepropositionDefineNeedsOverallguidingprinciples/rulesa
48、pplyTechnicalDecisionSupportCustomer Relationship ManagementEnterprise Resource Planning(ERP)Supply ChainCollaborativeComputing A.T.Kearney1/8510Color/25uApplication OptionsVendor1Vendor2Vendor3Vendor4Vendor5Vendor6uTechnical OptionsuDatabasex,y,zuOpSystemuComputeruConsensuswithteamuPublishapplicati
49、onarchitecturesolutionsetuPublishimpactanalysisAlternativesDecision/ResultThe application architecture team is following a structured analysis process that test vendor solutions against our decision criteriaEvaluation Criteria1Hypotheses/Criteria Test Questions2Analysis“Leverage/Synergy”3Evaluation
50、and Decision Making4uCompileevaluationcriteriauDefine“mustmeet”criteriauAssigncriteriaweightingsuDeveloptestquestionsandhypothesesuPerformoptionanalysisuDevelopdecisiontreeuDevelopfactbasetotesthypothesesuEvaluateresultsagainstcriteriaanddecisionframeworksuAgreedecisionProject Stage GatesKey Project
