The document discusses several case studies of how companies managed their IT functions and projects, including both successes and failures. It provides lessons for treating IT as a business system aligned with corporate strategy, ensuring executive oversight of major projects, and setting IT priorities based on business needs rather than technology alone. It also summarizes the factors that contributed to Nike's failed global supply chain project and Cisco's large inventory write-off despite having sophisticated IT systems.

2. A Big Splash In Wall Street in March 2001... Nike Says Profit Woes Due To IT Philip Knight, Nike’s Chairman and CEO, blamed the “complications arising from the impact of implementing our new demand-and-supply planning systems and processes” for the shortages of some products and excess amounts of others as well as late deliveries. Result: Profits Fell Short of Estimate by 33% I guess my immediate reaction is: This is what we get for $400 million? Source: Computerworld, March 5, 2001

5.  ---------- SUCCESS ---------  FAILURE @ ASIAN PAINTS FACTOR @ NIKE Restricted to India Number of locations Suppliers across the globe Decided to install SCM software before ERP software Top management insight Did not recognize the complexity of a global Supply Chain Project Phased – First SCM, then ERP, last CRM Implementation strategy Three packages simultaneously – Nike IT staff spread thin Restructured in 1998, before SCM Project – only modest customization needed in the software Organization issues Heavy customization of i2 software to fit Nike’s business processes – no pilot test due to aggressive time-table i2 played a proactive role - suggested implementing smaller modules one at a time. i2’s role i2 did not adhere to what it did usually – it adopted a big-bang rollout approach

6. An Opportunity to be Seized. . . - Computers used in Business for Nearly Five Decades - Dazzling Progress in Technology - Significant Investments in IT Infrastructure Hardware, Software and Peopleware Focus on OPERATIONAL SYSTEMS has blurred the potential of using IT for MANAGING the Business YET . .

10. Companies That just Don’t Get IT! In the near future, some management guru will write a book about how executives in the 1990s spent too much money on IT because they were afraid to manage it properly. Unsure of what went on in the “black box”, they put their trust in technological experts to deliver business value from IT investment… CEOs don’t seem to apply the same management scrutiny to their IT department as they do to the rest of the organization. Source: Wall Street Journal , December 12, 1996

11. Why IT is a “Black Box” to Top Management … Unsure of what goes on within it and not particularly anxious to find out … Do not know “the right questions to ask and the wrong answers” … Cannot penetrate the “techno-speak” of the IT group

12. Treat IT as a Traditional Business System - Does Not Require “T” Knowledge Business Strategy & Planning Product Development Operations Customer Service IT Strategy & Planning IT Applications Development & Implementation IT Infrastructure Operations User Support Typical Business Functions Typical IT Functions IT should be managed like any business system to deliver value.

18. A Key Lesson - How to View IT Investment In the information age, spending less is no longer the goal; getting benefits and maximizing cost effectiveness is the goal… … We manage IT as an integral part of every function in the company. Manufacturing decides how much to invest in IT, and IT becomes part of the COGs (Cost of Goods). The same thing happens in R&D, sales, finance, marketing and distribution, human resources, etc. While all this seems pretty obvious, it’s amazing the number of companies that lump most of their IT into G&A (General & Administrative) expense, and then manage IT to minimize the cost as if it were a necessary evil.

19. The Customer is THE Business - Pervades IT Department Too I have 150,000 registered Customers hooked up - those are customers with a big “C” - compared to 15,000 Cisco employees. In contrast to most internally focused IT organization in many other companies, my mission does not primarily focus on providing services and systems to meet the needs of the employees of the business. In fact, I refer to my employee users as clients, and not as customers. Customers that are using our systems directly express higher satisfaction with us, and enjoy a lower cost of doing business with us than those who do not use our systems. And, of course, we also lower our cost of doing business. CIO spends 25% of his time meeting with customers to brief them on his IT mission, strategies, organization structure and applications.

24. The Demand Chain CISCO Ford Boeing Merrill Lynch Auto Dealers Auto Buyers Airlines Air Travelers Stock Traders

37. Management Imperatives - To Make IT Business-Smart 4. Head of IT should be business savvy and be an “equal among peers” in the boardroom – CIO is not just a change of title

43. Cemex Today….. - World’s third largest cement manufacturer -- Has plants in 30 countries -- Sales in 60 more countries -- More profitable than either France’s Lafarge or Switzerland’s Holcim - A blue-print of a “smart” business model -- Added a brilliantly integrated layer of IT to an asset-intensive low-efficiency business -- In today’s digital age, anyone can play! - Essentially built a “bits” factory to complement and support the “atoms” factory

44. The Beginning - A New CEO in 1985 Business Issues 1. An overly diversified company - Also owned hotels, petrochemical plants, mining companies, etc 2. High volatility of the Mexican economic and financial systems 3. Price pressure from more efficient multinational companies 4. Growing competition from new low-cost Asian companies A number of factors could be listed in the “excuses” section of the CEO letter in the annual report. But the new CEO, grandson of the founder and a Stanford MBA, preferred to change the rules of the game!

45. The Transformation…. - Started by divesting almost all the non-cement businesses - Hired a Wharton MBA to serve as Chief Information Officer Powerful partnership was THE key -- A CEO attuned to the strategic value of IT -- A CIO with a genuine understanding of business

46. Delivering Ready-mixed Concrete -A Tough Business Anywhere! - A logistical nightmare to get mixer trucks from the plants to the building sites at the right time -- cement has to be poured within 90 minutes of mixing. - Especially so in Mexico -- wild weather, traffic gridlock, work stoppages and arbitrary government inspections may hit at any time -- And, customers (contractors at the site) who are always changing their orders - 50% of orders are cancelled or rescheduled or changed (vs 5% change rate at a US Cemex affiliate) - Cemex tried to force customers into predictability -- Required orders 24 hours in advance -- Imposed price penalties for change - Still, could promise delivery only within 3 hours

47. Starting Point: Who Else has Solved Our Problem? - Benchmark the Best World-Class Practices Fed-Ex - Customers never provide forecasts - Achieved unparalleled speed and reliability of delivery of packages to millions of destinations around the world, using Memphis as a hub . Exxon - Tracking, scheduling and rerouting oil shipments - Global fleet of tankers, at the mercy of ocean weather, military and political unrest, was efficiently managed Houston 911 Center - Coordinates hundreds of ambulances, fire and police vehicles in response to unpredictable, often life-threatening, emergency calls - Deal with city traffic, inaccurate addresses and incomplete information

48. Common Thread in the Three Companies….. They had developed systems for quickly and accurately capturing, responding to , and sharing information about their customer’s needs. As a result, they were able to substitute management of information for deployment of costly assets such as trucks, ships and employees - BITS in place of ATOMS .

49. The IT-Enabled Solution CEMEXNET, a satellite system for communications (1987 - 89) - Connected 11 Cemex cement factories in Mexico and 175 mixing plants with central “operations center” - Central coordination of supply and demand instead of each plant operating independently - Central dispatching system for routing of 1500 trucks; previously each plant had its own fleet of trucks Computer terminals installed in every delivery truck with Global Positioning Satellite (GPS) systems - Could dispatch the right truck to pick up and deliver a particular grade of cement (8000 products) - Reroute the truck when the chaotic traffic conditions delayed delivery - Redirect deliveries from one customer to another if last- minute changes were made

50. Expert System - For Smarter Decisions - To project order rates by day, hour and location -- improved predictions as the data grew - Customer site of the incoming order is triangulated against the mixing plants and delivery trucks scattered throughout the city - ”Best” combination selected based on traffic, pouring conditions and the pattern of predicted orders

51. The Payoff... - Reduced the 3-hour delivery window for ready-mix concrete to 20 minutes with reliability of over 98%. Goal: 10 minutes. - Fewer lost orders because the phone systems aren’t tied up - Uses 35 % fewer trucks -- Less inventory in transit -- Large savings in fuel, equipment maintenance and payroll costs.

52. Cemex’s Unique Value Proposition To Its Customers - Rapid Responses -- Order changes and same-day delivery are standard service - Reliability -- Worry less about late deliveries -- Avoid huge costs of idle workers in case of late deliveries - Guarantee -- If the truck is late by over 20 minutes, buyer gets rebate of 5%

53. New Technology is Nothing Without New Attitudes ... - Dispatchers were told: “ You are no longer scheduling; you are committing.” - Compulsory computer and customer-service training for drivers (with an average schooling of 6 years) -- Six hours at half-pay -- every Sunday for 2 years - Changing of “old” work rules -- Unions consented on the promise that more efficient trucks meant higher pay. It is better for the Company as well as for us. As a matter of fact, we are the Company. (Salvador Lamas, a truck driver and union leader)

54. Today: IT is a Separate Business - Spun off the internal IT department, Cemtec, and joined it with 4 other Spanish and Latin American firms in 2000. -- Created Neoris, an IT consultancy - Neoris is now part of CxNetworks -- a Miami-based subsidiary that Cemex wants to use to turn itself into an e-business - Launched under CxNetworks: -- Construmix: a construction industry online marketplace -- Latinexus: an e-procurement site