Expert answer:management information system
Expert answer:here is a homework file and others are related material.here is a homework file and others are related material
session_25____corporate_strategy_slide_deck_040517.ppt
session_25___capital_one_case_study_2_.docx
session_25___capitol_one_case_homework_questions___student_worksheet_1_.docx
session_25___corporate_strategy_and_im_it_enablement_1_.docx
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Corporate Strategy
through Information
Management and Information
Technology Enablement
Session 25– 4/7/17
MIS Integrative Framework
A. Business
Drivers/
Needs/Results
1.
2.
3.
4.
(e.g.,
Operational
Excellence,
Customer
Intimacy,
Product
Leadership
some
combination)
Drives
alignment
Enables
B. Information
Requirements
1. Operations and
Transaction
Processing
2. Management
and Control
3. Innovation,
Strategy and
Corporate
Learning
Drives
alignment
Enables
C. Information
Processing
Infrastructure
and
Applications
1. Business
Processes
2. Information
Technology
3. People and
Organization
structure
Business Results/Lesson Learned
Session 25– 4/7/17
Our focus today.
Today’s Business Challenges
• Key Challenges All Businesses Face?
– Small , Medium, Large
– New & Established
• How Are Companies Meeting Their
Challenges?
• Role For Information Technology?
• Information Technology Challenges?
• What Is Critical For Success?
Session 25– 4/7/17
Impact of Technology
Internet Standards
TCP/IP, HTML, URL
Micro Electronics
Faster, Smaller, Cheaper
SPEEDING
UP
Ubiquitous Comm.
Cell, Lan, WiFi, Broadband
Access to Everyone
Anywhere, Anytime
What Are The Business Implications?
Session 25– 4/7/17
Session 25– 4/7/17
Creative Destruction
• What Does This Mean?
• Creative destruction is a process through which something
new brings about the demise of whatever existed before it.
• Driver of Market Based Economies
• Most Important One In History? How Long
Did It Take?
• Other Examples
• Drivers?
• Implications For Management?
Session 25– 4/7/17
Strategy vs. Management
Business/IT Strategy = Doing Right Things
Management/Project Management = Doing
Things Right
Session 25– 4/7/17
Strategy / Strategic Systems
Strategy: An Approach To Achieve Goals Consistent With Mission/Purpose
Strategic Systems are closely aligned
and sometimes identified as a strategy
Goal
But the projects to create them are
really tactics that support a strategy
Goal
Tactic
Tactic
Usually an
action
Mission/Purpose
Strategy
Goal
Strategy
Usually an
approach,
state or
capability
Usually
Quantitative
High
Frequency of Change
Session 25– 4/7/17
Fundamental
Low
Business Value Structure
Value Discovery
TACTICS
STRATEGY
GOAL
MISSION
PURPOSE
Session 25– 4/7/17
I/T Alignment
Aligned Organizations
Top Down
Session 25– 4/7/17
Inside Out
Strategic Information Systems
Can be any kind of information
system so long as it:
• Supports a Competitive Position
• Creates a Competitive Advantage
• Reduces a Competitive Disadvantage
Session 25– 4/7/17
I/T Strategy Aligned with Co.
Core Competency
Product Leadership
Winning I/T Strategy Focuses
On Company Core Strategy
Operational Excellence
Customer Intimacy
Discipline of Market Leaders (1997) by Michael Treacy & Fred Wiersema
Session 25– 4/7/17
I/T Strategy Aligned with Co.
Core Competency
Product Leadership
Winning I/T Strategy Focuses
On Company Core Strategy
Operational Excellence
Customer Intimacy
Discipline of Market Leaders by Michael Tracy & Fred Wiersema
Session 25– 4/7/17
I/T Strategy Aligned with Co.
Core Competency
Product Leadership
Winning I/T Strategy Focuses
On Company Core Strategy
Operational Excellence
Customer Intimacy
Discipline of Market Leaders by Michael Tracy & Fred Wiersema
Session 25– 4/7/17
I/T Strategy Aligned with Co.
Core Competency
Product Leadership
Winning I/T Strategy Focuses
On Company Core Strategy
Operational Excellence
Customer Intimacy
Discipline of Market Leaders by Michael Tracy & Fred Wiersema
Session 25– 4/7/17
IM Based Strategies
1.
2.
3.
4.
Reengineer business processes (BPR) to better
align with your information systems.
Be an agile, innovative company – new ways of
doing things as well as new products and services.
Become a customer focused business – listen to
your customers and learn from them – ties to
innovation.
Build a knowledge creating company – from
knowledge comes further experimentation that
leads in turn to corporate learning and innovation
Session 25– 4/7/17
How many of these strategies did
Capital One employ?
• BPR: Efficient and effective business
operations supported by information
technology?
• Agile company?
• Customer-focused company?
• Knowledge-creating company?
Session 25– 4/7/17
Reasons Strategic Systems Fail
• Don’t match corporate core competency,
therefore value not achieved.
• Organizations not capable of implementing
major projects.
• Organizations don’t change processes to
take advantage of the opportunity.
Session 25– 4/7/17
The effective use of your
organization’s information assets
and its information technology can
provide competitive advantage if it
helps the organization to perform
more efficiently, effectively, and
intelligently than its competitors.
Session 25– 4/7/17
What’s in Your Wallet?
Session 25– 4/7/17
Goal is to maximize net revenue
• Interest
• Late fees
Partial
default
Interest
Risk
$
Low
High
The Risk
Sweet
Spot
Session 25– 4/7/17
Total
default
Points to Consider in Process Design:
Marketing
?
Apply for card
Loyalty
programs
?
Payment
patterns/risk
management
?
Run a balance
and pay
interest
Default
patterns/risk
management
?
Identify and
prevent
default
Dunning
techniques
?
Collect
defaulted debt
Use card
Session 25– 4/7/17
What must we do to attract
“good” customers and
close the deal?
What must we do to get
customers to use our card
and bond with our
company?
What must we do to get
customers to run a balance
and pay interest and late
fees?
What must we do to identify
default risks and prevent
customer from defaulting?
What must we do to get
customers to pay defaulted
debt?
A theory of credit card profitability
Customer
Profile
External
information
CapOne
Actions
•
•
•
•
Marketing
Setting terms
Loyalty programs
Customer
service
• Collections/Risk
management
Customer
behaviors
•
•
•
•
•
•
•
•
Theory
• Psychology
• Marketing
Session 25– 4/7/17
Apply for card
Use card
Carry balance
Pay regularly
Default
Pay off default
Switch card
Fraud
Profitability
• Revenue
• Expenses
CapitalOne: Information-Based Strategy
Based on
what is
known…
Info/
knowledge
Rapid,
continuous
feedback
Hypothesis
Learning/Testing
Scientific
Innovation
Analyze
Control:
DSS/ESS
• Revenue goals
• Expense goals
Measure
TPS
Session 25– 4/7/17
Experiment
Mass
customization
Enables
rapid rollout
of custom
products for
micro test
markets
CapitalOne: Strategy
Info/knowledge based strategy (scientific testing)
Rapid, continuous feedback
Info/
knowledge
Hypothesis
Experiment
Measure
Mass
customization
TPS
Analyze
Based on
what is
known…
• Enables custom
products for micro
markets
• Enables rapid rollout
Session 25– 4/7/17
DSS/ESS
Control:
• Revenue goals
• Expense goals
The IM/IT Enabled Solution at CapitalOne
Session 25– 4/7/17
Session 25: Corporate Strategy – The Capital One Case
For most of us, credit cards serve as personal lines of credit, where the card allows the consumer to
purchase and take possession of items immediately while actually paying for those items at some time
in the future and typically over an extended period of time. Some use credit cards merely for
convenience and as a way to manage the monthly cash flow. For others, credit cards enable borrowing
from a bank to purchase things that one could not otherwise afford through a cash purchase. The
convenience and flexibility of credit cards have made them tremendously popular among consumers
and since banks can charge interest as high as 20% per annum or more on credit card balances, they are
popular with financial services organizations as well. Indeed, so much so that if you are a working
person with good credit history, you are bombarded by offers from financial institutions to use their
cards. The competition is fierce with each provider working to out-market the competition through
special enticements, like bonus travel points and cash rewards.
In positioning their credit card offerings, most financial institutions employ a tried and true method
similar to product manufacturing whereby they conduct market research to establish the basic
specifications for a credit card offering. They may then pilot test the credit card with customer focus
groups before launching it to prospective customers through mass-mail advertising and more recently
through the exploitation of social media channels. While most of those so solicited already have credit
cards, they may be enticed to accept yet another card or perhaps to replace their existing card with a
new one based upon the “special introductory offer” that comes with its issue. Depending upon
patterns of customer acceptance and usage, the issuing company will monitor subsequent card sales
and from time to time adjust the offering to keep it competitive. As a net result of this approach, most
credit card products are pretty much the same and large credit card companies like American Express
might offer as few as three or four variations of their base card model to different customer categories
(e.g. Platinum, Gold, and Silver customer cards). But what if your company decided to avoid this vicious
competitive environment and to find a niche where no other financial institution has ventured? This is
just what Capital One has done.1
The leadership at Capital One recognized nearly from its inception in 1981 that financial institutions
have ignored a significant portion of the credit card desiring public, namely: those folks with poor credit
history who are therefore excluded from more traditional credit card offerings. Admittedly a portion of
this population is a bad credit risks that no lender wants as a customer. However, Capital One’s
leadership speculated that there exists a subset of this group who would gladly pay higher rates of
interest as well as reliably repay credit advances if given the opportunity. All that Capital One needed to
do was to sort out those who are a good credit risk from the rest of this underserved customer
population. Rather than employ the tried and true product manufacturing model, Capital One’s team
turned to an information-based strategy that exploited the data already at hand within the
organization’s transaction processing systems.
As Richard D. Fairbank, the founder and CEO of Capital One Financial Corporation observed early on in
his tenure that the credit card “is the key to an information machine—a machine fueled by data on who
you are, what sort of people you live among, whether you’ll carry a balance or avoid finance charges at
all costs.” By using the transactional information generated by the millions of existing Capital One credit
card holders, his firm have both the demographic data and the spending and payment histories to
decompose its customer base into clearly identifiable cohorts and to accurately assess their respective
1
This case study draws on a number of sources including the Capital One Web site (www.CapitalOne.com), Sue
Bushell’s “A Capital Idea,” CIO Magazine, (6/2/2004), and Mike McNamee’s interview with Capital One CEO,
Richard D Fairbanks, in Stanford Business Journal 69/3 (2001).
prepared by mhz and rmk 022414
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Session 25: Corporate Strategy – The Capital One Case
levels of credit risk (i.e. the risk of defaulting on their credit card payments). With this information in
hand, Capital One was in the position to model customized products, employing thousands of
combinations of rates, fees, credit lines, rewards, and services.
The underlying technology in this story should be familiar to students of information management. Like
all financial service companies, Capital One maintains enterprise-wide transaction processing systems to
enable credit card account management. These systems capture each and every customer transaction
(a.k.a. credit-card swipe) documenting how much was spent by the customer where and when. These
same systems capture data concerning payment history, such as which customers pay off their cards
immediately and which ones do so in installments overtime with interest. Through the application
process to receive a credit card in the first place, a separate information system captures personal
information about each card holder. Another vital piece of the Capital One information technology
platform is a decision support system (DSS) that brings together data from the firms various transaction
systems to create a longitudinal view of patterns of use.
From the analysis of this data, the Capital One team created a model for credit card risk assessment.
This knowledge of customer behavior was then implemented as part of a so-called “expert system” that
in turn provides call center personnel and Capital One consumer Web sites with scripts that are
employed when interacting with new credit card applicants. In 2000 alone, the company carried out
45,000 such “tests” of their credit card risk model with new customers. Anyone in the company can
propose a test, and if the results are promising, Capital One places the new product into use
immediately. “We don’t hesitate, because our testing has already told us what will work,” Fairbank says.
This approach to product development and business planning sets Capitol One apart from its
competition and allows it to offer thousands of different credit card packages as opposed to the three or
four options offered by most competitors. As the Chief Technology Officer (CTO) at Capital One, Roy E.
Lawrence observed as early as 2003, “by placing technology at the core, IT has become the central
nervous system of Capital One’s information-based strategy. Through a definitive, yet simple IT
strategy, Capital One has aligned its management model and business processes to drive game-changing
strategies.” What makes this strategy so impactful at Capital One is the continuous process of
experimentation, testing, and corporate learning that help to inform and help define action.
prepared by mhz and rmk 022414
Page 2
Session 25: Capital One Case Study Questions
CapitolOne Case Homework Questions:
1) What is Capital One’s business and who are their competitors? (lists)
a) .
b) .
c) add as many lines as required…..
2) Per the case study, what is one of their major strategies to grow profitably and
compete? (list)
a) .
b) .
c) add as many lines as required…..
3) How do they use information to implement their strategy? What kinds of
information do they use and where does it come from? (table)
Information Employed in the Capital
One Credit Card Process
Sources of This Information
add as many rows as required….
4) List and describe the information technologies used to support their strategy?
(table)
IM/IT Enabling Information System
Description
add as many rows as required….
5) Describe their notion of a “scientific test”. Contrast this approach to product
development and launch with a more traditional approach that a
manufacturing company might use to determine how much product to
produce. (table)
Traditional Manufacturing Approach
prepared by rmk 022414
Capital One’s Scientific Testing Approach
Page 1
Session 25: Capital One Case Study Questions
add as many rows as required….
prepared by rmk 022414
Page 2
Session 25 – Corporate Strategy through IM/IT Enablement
Introduction
Competitive strategy simply means the way in which a company chooses to compete for customers or
for revenue against other companies operating in its industry. This generally requires the company to
create and exploit some type of advantage over its competitors.
There are two basic elements of competitive strategy:
1) The “strategic position” that an organization choses to adopt and defend in its industry. This
position is traditionally described by the organization’s “product/market” strategy, that is,
the products (or services) it has elected to sell and the specific market or markets it intends
to sell them to.
2) The “generic” strategy by which the organization intends to defend that position against
incursion by competitors (assuming it is an attractive enough position that competitors
would find it desirable.)
Product/Market Strategy
We can think of an industry as a “competitive space” described along two dimensions: 1) markets or
customer segments and 2) products or product categories. Strategy can then be described as the
specific product/market combinations for which a company is choosing to compete. For example,
Ferrari sells sports cards to the rich and famous, while Toyota sells sedans to the rest of us. In this case
we have defined the market dimension based on income or wealth, and the product dimension based
on price or quality. However, the specific factors used to describe the market and product dimensions
may vary from industry to industry.
Ideally companies would like to choose a strategic position that is unique in their industry so that
potential customers can distinguish them from competitors. Ferrari does not want potential customers
to confuse what they offer with what Toyota offers, and vice versa. If the organization’s product/market
position is unique (meaning that they are the only company offering that specific product to that specific
market) and that segment of the market finds the product or service to be attractive, then the
organization in that strategic position will have an advantage over its competitors. It is the only one that
can serve that market well. Short of that, they will have to fight for market share more vigorously
against companies that have taken a similar strategic position.
Generic Strategies
There are two well-known frameworks for categorizing the basis on which companies defend their
strategic product-market positions from competitors. These categories are often referred to as
“generic” strategies, in contrast to the more specific product-market strategy framework described
above.
The first generic strategy framework, created by Michael Porter in the 1970s (and based on economic
theory) proposed that organizations could compete in any of three ways:
1. By producing a product that was better (or perceived as better) than competitors’ similar
products, but offered at the same price as the competitors’ product. This is called the
“differentiation” strategy.
prepared by mz and rmk 053014
Page 1
Session 25 – Corporate Strategy through IM/IT Enablement
2. By producing a product that was as good as competitors’ similar products, but offered at a lower
price (requiring the organization to have lower costs). This is called the “low cost” strategy.
3. By offering possibly neither the best product nor the lowest cost, but instead understanding the
market so well that it could provide better overall service to that market. This is called the
“market focus” strategy.
A little over a decade later, Michael Treacy and Fred Wiersema developed a similar framework based on
observing real companies. Their framework has become popular as well. Treacy and Wiersema called
their three strategic categories “value disciplines,” and described what an organization would need to
do to implement each of them. They believed that because of the competing and mutually exclusive
demands of each of these disciplines, companies could be good at only one (or possibly two), and so had
to make a hard choice as to how they wanted to compete. The three disciplines are:
1. Product leadership: focus is on developing and offering innovative products or technologies.
This is similar to Porter’s differentiation strategy.
2. Operational excellence: focus is on operating at the lowest cost and with highest efficiency,
while executing operations with high quality. This is similar to Porter’s low cost strategy.
3. Customer Intimacy: focus is on providing th …
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