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chapter 1
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and state-of-the-art systems infrastructure operating 24/7 in real time over the Internet was clearly beyond the capability of the company to do all at once. It was better to grow into this over time. So I used the seven guidelines to facilitate a process of selecting and combining different ideas until a truly resourceful and creative IT strategy emerged. The strategy called for construction of a suite of four systems that each provided value in their own right and worked together to deliver an e-business infrastructure with the performance capabilities we needed. Those systems were built with a mixture of simple technology and offthe-shelf software packages. As a consequence, we spent only a fraction of what our competitors did. The first version of our e-business infrastructure was up and running in nine months, whereas our competitors took much longer to get their infrastructure in place. The four systems were: 1. A computing and communications infrastructure and data center to run the e-business systems and provide a virtual private network (VPN) to ensure data security for people using the systems. 2. An enhanced Web site (Web portal) with a link to an outside service provider for Web-based order entry and an internally developed sales history reporting system for use by customers. 3. A data warehouse to store and retrieve data needed by the sales history reporting system and to support our internal business intelligence needs. 4. An Internet-based data delivery system to provide electronic, two-way data transfer between the different computer systems of our members, customers, and suppliers. We named this system NetLinkNSC . In the following years we continued to enhance these systems with new features as needed. We used the capabilities these systems provided to form supply chain partnerships with new and existing national account customers. These systems allowed us to work cooperatively with them to lower their overall cost of purchasing and using our products without requiring us to just reduce prices on the items we sold them. The company was able to command slightly higher gross margins than its competitors because customers were willing to pay a bit more in order to get the
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customized bundle of value-added services that we could provide them thanks to the IT infrastructure we developed. This strategy was particularly successful in growing the business in a new vertical market segments. One segment was the national building service contractor (BSC) market. These are companies that contract with property managers to clean office buildings, shopping malls, healthcare facilities a very fragmented market that was consolidating into national chains. Our systems provided BSC customers with both e-procurement capabilities and daily updated sales history reporting. Their managers could get online reports that showed consumption of supplies by job site, by product, and by manufacturer over any time period they specified. Our e-business systems provided customers with key tools that allowed them to manage operating expenses and realize the economies of scale that supported their profit margins. By partnering with us, customers avoided the expense of building their own supply chain management systems. I structured the development and rollout of these systems into phases that each took three to nine months, as shown in Exhibit 1.4. Each phase created a set of production subsystems that became the basis upon which to build further subsystems or enhancements. As these phases were completed, we were able to take stock of the changes in our markets and respond appropriately to opportunities as they presented themselves.
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Just as farmers and people who make their living from the land have a rhythm to their lives that is set by the four seasons, so too do corporate CIOs (whether they know it or not). Instead of the four seasons we in business have the four quarters. Each quarter has its demands and opportunities. Like good farmers who prosper by responding appropriately to each season, effective CIOs make the best use of the opportunities and risks presented by each quarter if they are to prosper. The rhythm of the quarters isn t quite as well defined as the rhythm of the seasons, but there is a certain tempo in each quarter s activities for most enterprises. The first quarter s tempo is quick get out of the gate and get started on the year s major development projects. The second
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PHASE 1 Build version 1.0 of supply chain system (9 Months) PHASE 2 Build Internetbased system to link to customer and member computer systems Build data warehouse Build sales history reporting system for use by customers Enhance NSC Web site to provide customer order entry and sales history reporting Connect new e-business system with members systems Enhance data warehouse and sales history reporting to support member companies Assist member companies (3 Months)
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The strategy was broken into four phases. Each phase provided value in its own right and built upon the previous phase.
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PHASE 3 Build version 2.0 of supply chain system (9 Months) PHASE 4 Enhance e-business system with ability to handle EDI, FTP, and XML Enhance data warehouse and sales history reporting with additional requested features Introduce use of EPC numbers for product ordering and sales history reporting Integrate into supply chains (Quarterly)
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