Digital Strategy

(for MBA Students and IT Fans)

Professor Jay Rajasekera

Lecture 5 Digital Strategy Map

1
 Connecting IT to Strategy
Tangible Intangible
Strategy
e.g: Money e.g: Loyalty

IT
Model
IT Hardware Software Data Information Knowledge

Hardware Software

Tangible Intangible
 Connecting IT to Strategy
Tangible Intangible
Strategy

IT
Tangible Intangible
Company has developed 20 mobile apps of its own in the last
two years that allow workers to stay connected day and night.

EOG has also collected data from 5,000 horizontal wells in

almost every major unconventional play in the U.S., with the help
of new "black boxes" deployed on rigs to help get more insight
into data collected, he added.

The company has been collecting its own data for nearly 30
years, but in the last two to three years EOG has had access
to real-time data that allow it to steer drill bits in the most
productive part of the rock.

"Data is king and one of our most valuable resources,"

Bhakhri, CIO said. Faster access to data means quicker and
more precise drilling, cutting time and waste and lowering costs.

http://www.investors.com/news/eog/
 EOG: IT to Strategy
Tangible Intangible
Strategy

IT
Tangible Intangible
Expedia has around 150 sites that operate in 70 countries
worldwide, with around 50 million visitors a month and 200
mobile app downloads per minute – little to say Expedia
collects daily massive amounts of data.

Collecting data has been at the core of the online travel agent in
order to differentiate itself first to brick-and-mortar travel
companies, then to its digital competitors, improving the
quality of its offer to the customer and the speed to bring
him to satisfaction with a tailor-made trip – whether hotel
and/or flight.

Expedia particularly focused its efforts in understanding

and improving customer lifetime value.
https://digit.hbs.org/submission/expedias-use-of-big-data-from-efficient-collection-to-wise-exploitation-for-better-customer-
satisfaction/
 Expedia: IT to Strategy
Tangible Intangible
Strategy

IT
Tangible Intangible
 Porter: Strategy

• Deliver greater value than

competitors at same cost
• Deliver comparable value as
competitors at lower cost

• Later  Connectivity
 Drucker: Strategy

• Core Competence
• Acquired Competence
 Trend to use New Methods

Source: Univ of Michigan Business School:

http://www.eepulse.com/documents/pdfs/ExecutingStrategy.pdf
 Major Problem with Strategy is
Execution
• “Less than 10% of strategies effectively
formulated are effectively executed”
• “In the majority of failures – we estimate
70% – the real problem isn’t (bad
strategy)…. It’s bad execution.”
• Do not link strategy to budgeting (60%)

Source: Fortune Magazine + Other

Something more than Porter and
Drucker is needed
 How to Execute Strategy?
• Traditional methods
• …
– CEO Leadership
– CEO authority
– Still 70% failure?
• Activity Based Costing (ABC)  1987 (pg 86
Strategy Maps text)

• Balance Score Card (BSC)  1992 (pg 53 Strategy

Maps text)
 Valuation of IT has become critical
(50 year progression)
Time Primary Approach to Metrics Who would
Application valuate valuate
1950- Labor Cost Payback Accountants,
mid 1970 Savings reduction ROI Auditors
Late 1970s - Automation, Accounting ROI, NPV, Accountants,
1980 MIS based IRR Auditors
1990s BPR ABC BSC Auditors, IS
Staff,
Managers
Late 1990s .com Internet Forgotten in Journalists,
Y2K the rush Nasdaq
Valuation of IT has become critical
(50 year progression)
Time Primary Approach to Metrics Who would
Application valuate valuate
2000 .com burst Money How much Wall St.
lost
Now Wide range Strategic BSC, Top
of impact, Strategy managers,
applications Customer Maps CEO,
Satisfaction KPIs Consumers
Connect “IT Strategy to “Profit”

Profit Equation

Strategy is to justify
the “Profit”

IT: Process or Product Innovation

 Sometimes the “Strategic
Objectives” are Different

Strategic Objectives

Strategy Strategy is to justify

Map the “Objectives”

IT: Process or Product Innovation

Profit = (handling charge per TEU
– handling cost per TEU) x
(No. of TEU’s handled
per month)

FAST
CITOS
CONNECT
Profit = (handling charge per TEU
– handling cost per TEU) x
Strategy Map!
(No. of TEU’s handled
per month)

Customer Customer
Perspective Perspective

Internal Internal
Perspective Perspective

FAST
CITOS
CONNECT
 Strategy Map
(Kaplan and Norton) Some
Examples??

Tangible 1) Financial Productivity Revenue Growth

Outcome Perspective Strategy Strategy

2) Customer
Perspective
Customer Value
Propositions
Value
Creation
By
Strategy Operations Customer Innovation Regulatory
3) Internal
Management Management Process and Social
Perspective Process Process Process

4) Learning Human Information Organization

Intangible
& Growth
Assets
Perspective
Capital Capital Capital

Further Reading: “Measuring Strategic Readiness of Intangible Assets”, Harvard Business Review, Feb
2004, pg 53-63
 CRM: Strategy Map
How to measure intangible asset??

Financial Perspective Tangible

Outcome

Customer Perspective
Value
Creation
By
Internal Perspective Strategy
? ?
(People Responsible)

Learning & Growth Intangible

Perspective (IT Assets
Highly complex CRM System
Resources)
 Database: Strategy Map
How to measure intangible asset??

Financial Perspective Tangible

Outcome

Customer Perspective
Value
Creation
By
Strategy
Internal Perspective ? ?

Intangible
Learning & Growth Assets
Database of 3 million new customers
Perspective
 Learning and Growth
Customized for IT
IT Systems are categorized as:
• Transformational Applications
• Analytical Applications
• Transaction Processing Applications
• Networking and Infra
More Detail; Read: measuring-strategic-readiness-Bank-Example-HBR-feb-
2004.pdf in this folder
 Learning and Growth
Customized for IT
• Transformational Applications
• Analytical Applications
• Transaction Processing Applications
• Networking and Infra
PSA Systems
• CITOS
• BOXNET
• PORTNET
• TRADENET
• FAST CONNECT
 Learning and Growth
Customized for IT
• Transformational Applications
• Analytical Applications
• Transaction Processing Applications
• Networking and Infra
7-11 Systems
• Store-wide Network
• Hardware,
• Data Analysis
• Graphic Order Terminal
 IT Strategy Map
IT S trategy M ap and V alue P roposition P aths for R akuten

Financial

C ustom er

Internal O perationalExcellence C ustom er M anagem ent Innovation

P erspective
G roup in
C harge

Transform ati
onal
A pplications
A nalytical
Learning and A pplications
G rw oth Transaction
P erspective P rocessing
A pplications
N etw orking
and Infra

Discuss in class (along with student inputs)

See: strategy-map-for-a-banks-IT-strategy.xls
And: strategy-map-sample-work-sheet.xls
END: 5