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2014 MBL93GX

Module overview 2014


E-business and technology management

MBL93GX
Year module
IMPORTANT INFORMATION:
This module overview contains important information
on your module.

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CONTENTS
Page
CONTENTS............................................................................................................................................... 2
1

INTRODUCTION........................................................................................................................... 3

PURPOSE AND BROAD AND SPECIFIC OUTCOMES FOR THE MODULE..............................3

2.1

Purpose......................................................................................................................................... 3

2.2

Broad and specific outcomes......................................................................................................... 4

LECTURERS AND CONTACT DETAILS......................................................................................5

3.1

Lecturers........................................................................................................................................ 5

3.2

Area............................................................................................................................................... 6

3.3

University....................................................................................................................................... 6

MODULE-RELATED RESOURCES..............................................................................................6

4.1

Prescribed books........................................................................................................................... 6

4.2

Recommended books.................................................................................................................... 6

TOPICS......................................................................................................................................... 7

STUDY SCHOOL PLAN.............................................................................................................. 12

MODULE-SPECIFIC STUDY PLAN............................................................................................12

ASSESSMENT............................................................................................................................ 13

OTHER ASSESSMENT METHODS............................................................................................23

10

EXAMINATION............................................................................................................................ 23

11

FREQUENTLY ASKED QUESTIONS..........................................................................................23

12

SOURCES CONSULTED............................................................................................................ 23

13

CONCLUSION............................................................................................................................. 23

14

ADDENDUM................................................................................................................................ 23

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1 INTRODUCTION
Dear Student
Welcome to the module, E-business and technology management (MBL93GX). This
document provides important information on the course. Please familiarise yourself with the
main learning outcomes for this module and ensure you have the document with you when
attending study schools. You are invited to consult with us when faced with challenges so that
we may guide you in this module.

2 PURPOSE AND BROAD AND SPECIFIC OUTCOMES FOR THE MODULE


2.1

Purpose

The purpose of this module overview is to

assist you in your journey through the prescribed material for this module

help you gain an understanding of the pedagogical approach to the module

indicate the relative importance of the different topics in this module

The guidelines provided here are expected to bring you closer to the fundamentals of the
subject matter, both in terms of understanding the practical forces relating to the knowledge
base and the environmental dynamics affecting the fundamentals. There are many reasons for
studying technology management and the related field of e-business management.
The key differentiator in a competitive environment is the business model the organisation uses
and how effectively this model is implemented and operated. Changes in the technological
landscape provide a number of new opportunities that can be opened up in the marketplace.
This important factor, combined with the fact that the marketplace changes or adapts to the use
of new technology, enables companies, both established and new, to create new services to
offer in the marketplace. These services are usually based on new technology that enables
companies to meet the needs of the market more effectively than their competitors.
Managers make many decisions based on intuition, but they require information that will clarify
the situation and reduce uncertainty when the decision involves risk. Nobody would disagree
with the fact that managers in the technological arena need a great deal of insight, knowledge
and information to fulfil their responsibilities and make sound decisions. In this module, an
attempt is made to provide you with the latest insights from the fields of technology strategy and
e-business strategy, which will enable you to make better and more informed decisions in a fastmoving global marketplace.
You will have to demonstrate your ability to apply various concepts/theories to practical real-life
situations. A combination of the lecturing and case study method will be used, and during
lecturing contact sessions, you will be expected to participate in discussions. Active interaction
between the lecturer and students in the classroom and during classes will be encouraged. It is
essential for you to be cooperative and supportive of one another, and share your knowledge,
experience and resources freely. Making creative use of the energy of dominating students, and
encouraging the participation of quiet members in a group is the kind of group skill that is
essential for a successful learning experience. You should be able to set individual learning
objectives, while respecting and participating in the setting and fulfilling of group objectives.
Many skills are often learnt in a group setting, requiring consideration and sensitivity to the
needs of other students. An approach that is in accordance with advanced adult learning will be
followed in this module.

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You will not be expected to memorise the study material, but the emphasis will be on
understanding and applying the various concepts/theories/models in real-life situations. The
emphasis is therefore on problem solving. The lecturer will have a holistic, practical approach,
looking at the broader picture, trying to maintain an effective balance between theory and
practice.
An attempt will be made to break down the high fences around the various functions of the
organisation, and to show how they relate to one another. To illustrate the relationship between
the different elements and topics of the module (i.e. to help you learn, link and apply important
marketing concepts more effectively), your text contains road map learning tools throughout
each prescribed chapter. Each road map helps you to stop and think at important junctures in
your journey, to preview chapter material, to review and link key concepts and to provide
practical examples of the complex decisions that confront managers in the technology arena,
using a variety of case studies. If you follow these road maps, you will enjoy your journey and
ultimately arrive at your destination armed with the essential tools required for actual marketing
practice.
In this module, we look at strategic and management issues from the perspective of a
technology manager. The emphasis is therefore not on the technical details of all the functional
areas, but rather on the most important ways that relationships with other areas impact on
choices of strategy. Learning about the relationships between the different elements and topics
of the module and the cross-functional linkages will improve your ability to develop technology
strategies and plans.
A good command of the English language is essential for this module.
2.2

Broad and specific outcomes

The technology management course is different in focus from some of the other MBL courses.
This course concentrates on the strategic issues in technology. It focuses heavily on key
management ideas that form the basis of a conceptual understanding of the technology
management field. A common mistake is to think of technology as one-dimensional. The
dimensions of a specific technology go through various stages of characterisation, which are
influenced by the interaction between that technology and the marketplace. The management of
technology differs from traditional management in several ways. The aim of this course is to
provide you with the necessary conceptual models to recognise and understand the key
differences between a traditional approach and the technology management approach.
Technology management should lie clearly within the domain of management responsibility.
Unfortunately, the strategic aspects of technology are often left in the hands of scientists or
engineers who do not have a technology management background.
Although engineers might be brilliant at the technology and managerial side of the business, a
strategic perspective of technology management is of the utmost importance. History is littered
with high-technology firms that were hailed as having excellent management and engineers,
and as being very close to the client. However, this did not prevent their demise, as they
misunderstood the strategic implications of the fit between the organisations business model
and the nature of the sustaining or disruptive technologies that eventually killed them.
You will inadvertently also become quite accustomed to analysing various organisations via the
case study methodology. The assignments and the examination consist of case studies that test
your insight and ability to use the technology management models correctly.

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The purpose of this module is therefore to develop your understanding of the strategic issues
associated with effective technology management, and to provide enough insight for you to use
the various technology management models correctly. This module is designed to guide you
through the essential strategic guides necessary to make effective contributions to the strategic
direction of your organisation.
Learning objectives

Acquaint you with a fundamental understanding of the environment and strategies used in
high-technology firms.
Provide insight into the application of the technology and industry (T&I) life cycle and its
impact on strategic choices.
Show you how to effectively utilise the ideas behind technological competencies and
capabilities in strategic and organisational planning. The building of technological and core
competencies in the firm will also receive high priority.
Introduce the concepts of radical, evolutionary, revolutionary and disruptive technological
innovation and provide the context in which they can be used to make strategic decisions.
Provide the context in the utilisation and planning of technology in an industrial context.
Explain the impact of technological innovation in the organisational context and provide you
with insight into how to structure organisations for effective technological innovation.
Provide insight into the fields of strategic action, the management of radical innovation and
the differences between this and the management of architectural innovation.
Acquaint you with the management of technology sourcing and technology transfer.
Help you to understand the complexities involved in the management of new product
development.
Develop an understanding of e-business and e-commerce and to integrate e-strategy into
existing strategies.

3 LECTURERS AND CONTACT DETAILS


3.1

Lecturers

Prof Visvanathan Naicker [PhD]


Professor: Information Communication and Technology
Tel: +27 11 652 0223
Fax: +27 11 652 0299
Cell: +27 83 557 68 05
Email: naickv@unisa.ac.za
Unisa Graduate School of Business Leadership
Cnr Janadel & Alexandra Avenues, Midrand, 1685
PO Box 392, Unisa 0003
Visit us: www.sblunisa.ac.za
Prof John A van der Poll [PhD]
Professor: Information Communication and Technology
Tel: +27 11 652 0316
Fax: +27 11 652 0299
Cell: +27 84 5804008
Email: vdpolja@unisa.ac.za
Unisa Graduate School of Business Leadership
Cnr Janadel & Alexandra Avenues, Midrand, 1685
PO Box 392, Unisa 0003
Visit us: www.sblunisa.ac.za

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3.2

Area

Value chain
3.3

University

Unisa Graduate School of Business Leadership (SBL)

4 MODULE-RELATED RESOURCES
4.1

Prescribed books

Chaffey, D. 2011. E-business and e-commerce management. 5th edition. Upper Saddle River,
NJ: Prentice Hall.
4.2

Recommended books

Brown, CV, DeHayes, DW, Hoffer, JA, Martin, EW & Perkins, WC. 2012. Managing
information technology. 7th edition. Upper Saddle River, NJ: Prentice Hall.

Burgelman, RA, Christensen, CM & Wheelwright, SC. 2009. Strategic management of


technology and innovation. 5th edition. McGraw-Hill, Boston, USA

Chaffey, D & White, G. 2011. Business information management. 2nd edition. Harlow:
Financial Times/Prentice Hall.

Haag, S & Cummings, M. 2013. Management Information Systems for the Information Age,
9th Edition, McGraw-Hill Irwin, 2013, New York.

Haag, S, Cummings, M & McCubbrey, DJ. 2002. Management information systems for the
Information Age. Boston: McGraw-Hill Irwin.

Laudon, KC & Laudon JP. 2013. Management information systems: managing the digital
firm. 12th edition. US Edition, ISBN-13: 978-0133050691

OBrien, JA. 2002. Management information systems: managing information technology in


the e-business enterprise. 5th edition. Boston: McGraw-Hill Irwin.

Robson, W. 1997. Strategic management and information systems. 2nd edition, London:
Pitman.

Trott, P. 2012. Innovation management and new product development. 5th edition. Harlow:
Pearson Education.

Turban, E, McLean, E, Wetherbe, J, Bolloju, N & Davison, R. 2002. Information technology


for management. 3rd edition. New York: Wiley.

4.3

Electronic reserves (e-reserves)

www.pearsoned.co.uk/chaffey
4.4

Case studies

The course makes use of case studies that act as knowledge drivers. You are expected to have
a basic understanding of marketing, operations and financial management before starting the
course because these skills will be essential in the analysis of the case studies. Each case
study provides you with a complex scenario. You are expected to do a thorough analysis of the
case study, making use of all the traditional knowledge gained from your managerial
background and the other subjects you have studied in the MBL course. In various instances,
you will also be asked to make recommendations to the firm you have studied in the case study,
based on traditional management knowledge. Various technology management models will then

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be introduced to enable you to make a more informed decision about the case study. The case
study methodology therefore becomes the knowledge driver because it is used to introduce new
management models to you. The ordinary introduction of a management model is of little use if
it is not discussed in a specific context. The various case studies provide different contexts in
which the value of the technology management model becomes far more apparent than would
normally be the case.
4.5

Web links

http://www.zdnet.com
http://news.bbc.co.uk/2/hi/technology/
http://www.iamot.org
http://www.ieee.org
http://www.wired.com
http://www.economist.com
Also see the recommended websites in the prescribed texts.

5 TOPICS
5.1

The concept of innovation management

5.1.1 Tuition period


Time allocation: before study school 1
5.1.2 Specific outcomes

Develop a firm's innovative capabilities.


Manage innovation.
Design and implement a technology strategy.
Integrate and align technology strategy with corporate strategy.

5.1.3 Critical questions


The main question in these readings is how to put technology into corporate planning.

Does the strategic direction of the organisation change with changes in technology, or does
the technology have to align itself with the organisations goals?
In what way do changes in the marketplace alter the strategic direction of a company, or
does the marketplace change with the proactive implementation of new technologies?

The above questions are not easy to answer, but the prescribed text does provide a framework
that will help you to understand in which instances a particular option becomes more pertinent.
A number of additional questions arise that are more context specific to these reading
references. They are the following:

How can a company profit from technological innovation?


How should technology be incorporated into corporate planning?
How are core competencies defined and how can they be used to assist in strategic
planning?

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Which distinctive technological competencies and capabilities should be established to
maintain a competitive advantage?
What is the industry life cycle and how can it be used to simplify strategic decisions in the
technological arena?
What is strategy?
How is innovation fostered?
What are the relevant theories about organisations and innovation?
What IT systems are used and what is their impact on innovation?

5.1.4 Learning through activities


Read the following case studies in Trott (2012):
The success of the iPod raises the licensing question for Apple ... again, on page 33
Novels, new products and Harry Porter, on page 145
Each of the above cases is accompanied by a set of related questions. Attempt these questions
as well as the discussion questions posed as self-assessment exercises.
5.1.5 Self-assessment
You will be able to track your progress by answering the following questions:

Define the basic concepts of the management of technology.


Discuss the importance of technology management in todays business environment.
Discuss the influence of the industry life cycle on various aspects of the technology
management field.
Explain the differences between process innovation and product innovation.
Discuss the importance of core competencies in an organisation.
Explain why core competencies are an integral part of strategic planning for an organisation.
Explain the difference between operational effectiveness and strategic planning.
Construct a good business strategy.

5.1.6 Reflection
At this point, you should be able to:

define the basic concepts of the management of innovation


discuss the importance of innovation management in todays business environment
discuss the influence of the industry life cycle on various aspects of technology management
discuss the importance of core competencies in an organisation
explain why core competencies are an integral part of strategic planning for an organisation
explain the difference between operational effectiveness and strategic planning
identify and construct a good business strategy

If you feel that you cannot answer these questions effectively, please work through the readings
and case studies again.
5.1.7 Conclusion
The key focus of this topic is on the integration of innovation and strategy. Practical examples
and case studies were given in the text to highlight the importance of effective strategy

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formulation and of the concepts of the industry life cycle and core competencies. The focus on
different types of technology in the next section will enrich this discussion and enable you to
create more robust technology strategies.
5.2

Technology management and knowledge

5.2.1 Tuition period


Time allocation: after study school 1
5.2.2 Specific outcome
Manage a firms innovative capability through R&D and technology.
5.2.3 Critical questions
In this section, the critical question of how to manage innovation in organisations comes to the
fore. The most critical questions in this section are the following:

How do organisations manage their knowledge?

How do you change an organisations focus from an induced strategic action to an


autonomous strategic action?

How do you manage corporate research?

How do you manage the internal corporate venturing process?

How do you form strategic alliances?

What should the investment level in technology development be?

How should R&D projects be managed?

5.2.4 Learning through activities


Read the following case studies in Trott (2012):
The cork industry, the wine industry and the need for closure, on page 219
The long and difficult 13-year journey to the marketplace for Pfizers Viagra, on page 299
CSI and genetic fingerprinting, on page 334.
Sony-Ericsson mobile phone joint venture dependent on technology transfer, on page 365
Each of these case studies is accompanied by a set of related questions. Attempt these
questions as well as the discussion questions posed as self-assessment exercises.
5.2.5 Reflection
Managing technology in large organisations is not an easy task. New technologies are
transforming markets, business and society at an increasing rate. It is therefore essential for a
business to manage technology and its impact.
5.2.6 Conclusion
It is of the imperative for organisations to understand and manage technology in order to realise
the competitive advantage inherent in its use. This can only be done if the organisation

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understands how it accumulates and utilises knowledge, forms strategic alliances and manages
its R&D initiatives.
5.3

New product development (NPD)

5.3.1

Tuition period

Time allocation: before study school 1


5.3.2

Create and implement a new product development strategy.


Design and implement a technology strategy.
Integrate and align technology strategy with corporate strategy.

5.3.3

Specific outcomes

Critical questions

Which technologies should be used to implement core product design concepts, and how
should these technologies be embodied in products?
What is the difference between sustaining and disruptive innovation, and the impact of each
on corporate strategy?
How should technology and innovation be organised or managed?
Why do leading firms fail?
How do you manage the introduction of new technology into the marketplace?
How do you manage new product introduction into the market when there are competing
technologies?
How do you meet the challenge of disruptive change?
How do you define your own future in a fast-moving technological landscape?

5.3.4

Learning through activities

Read the following case studies in Trott (2012):

Launching innocent into the growing fruit smoothie market, on page 443

Halfords Oil: redesign and rebranding of existing product, on page 477

Dyson, Hoover and the bagless vacuum cleaner, on page 543

An analysis of 3M, the innovative company, on page 581

Each of these case studies is accompanied by a set of related questions. Attempt these
questions as well as the discussion questions posed as self-assessment exercises.
5.3.5

Self-assessment

To test your knowledge, answer the questions below by returning to the prescribed readings and
using this insight into the prescribed case studies.

Evaluate the product and brand strategy of a given organisation.

Trace the connection between differentiation strategy, core capabilities and positioning
strategy. How are they relevant to new product planning?

What measures would apply to assessing the success of a new product?

Discuss the various groups of NPD models and how they contribute to our understanding of
NPD.

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Explain why there is no one best organisational structure for new product development.

Why do so many products fail?

5.3.6

Reflection

In this section you were exposed to NPD, branding strategy, market research and management
of the NPD team. Each of the readings provides essential insight into the NPD strategy space to
allow you to make more intelligent decisions when embarking on NPD in your organisation and
its business model.
5.3.7

Conclusion

At this point you should be familiar with the NPD life cycle. You should be in a position to
oversee this life cycle. NPD is a deliberate and calculated process from feasibility assessment
right down to the branding, marketing and introduction to the market. Its success depends on
the various members of the NPD team pulling together under sound management guided by a
clear strategy.
5.4

E-commerce and e-business management

5.4.1

Tuition period

Time allocation: before study school 1


5.4.2

Specific outcome

Align an e-commerce strategy with corporate strategy.


5.4.3

Critical questions

In this section, the critical question of how to align an e-commerce strategy with corporate
strategy comes under the spotlight. The most critical questions in this section are the following:

When do you align corporate strategy with the e-commerce strategy, and when do you align
e-commerce strategy with corporate strategy?

How are the core needs of the customer aligned with the e-commerce strategy?

How do you build a resource system to embody and support the core benefits of the value
proposition to the customer?

5.4.4

Learning through activities

Read the following cases in Chaffey (2011):

Case 1.3: E-Bay the worlds largest e-business, on page 40

Case 5.1: Capital One creates value through e-business, on page 266

Case 5.3: Boo hoo learning from the largest European dot-com failure, on page 293

Case 8.3: The new Napster changes the music marketing mix, on page 441

Case 9.1: Tesco.com increases product range and uses triggered communications to
support CRM, on page 519.

Read part 2 in Chaffey (2011). The emphasis is on the e-business strategy, namely the strategic
analysis, objectives, definition and implementation. Read the case studies provided to reinforce

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the theory discussed in these sections of the text. Also attempt the exercises at the end of each
chapter as self-assessment.
5.4.5

Self-assessment

Describe the factors that would cause a company to continue to do business in a traditional
way and to avoid electronic commerce.
How might managers use SWOT analysis to identify new applications for electronic
commerce in their strategic business units?
Analyse a website and make recommendations to improve the interface layout.

5.4.6

Reflection

The e-commerce strategic alignment process is fairly straightforward. However, the application
of this knowledge is quite difficult. The choice of the axis of the customer segmentation map is a
difficult task, without even going into the difficulty of describing market segments in the grid. The
construction of the core focus of the company is also easy to follow in an example format, but
extremely difficult to create on your own. This linkage to the egg model and, finally, the resource
map, is essential in understanding the linkage between the value proposition of the company
and the core needs of the client.
5.4.7

Conclusion

This is one of the easier theoretical sections in this module. However, its application is quite
different. A number of practice runs with these theoretical guidelines should enable you to
master it fairly quickly.

6 STUDY SCHOOL PLAN


There will be only one study school for this module. During the study school, the topics will be
discussed in interactive sessions between the lecturer(s) and students.

7 MODULE-SPECIFIC STUDY PLAN


This is a one-year module. Students are required to read through the articles before the study
school, because knowledge of the topics will be required for discussions. The prescribed articles
should be considered as part of the theory that must be studied and applied for the
assessments.
The textbooks should be used as a basis for students when they prepare the assessments.

8 ASSESSMENT
There are a total of three assessments during the year. Two of the assessments will be group
based. Two formative assessments in the form of assignments are required. A final summative
assessment will be in the form of a written examination.
8.1

Assessment plan

Formative assessment will be by means of two group assignments. The assignments must be
submitted in order to obtain admission to examination. The year mark, which is based on the
mark obtained for the two compulsory group assignments, contributes 40% towards the final
mark. The summative assessment will be done through a written two-hour open-book
examination at the end of the year. The summative assessment contributes 60% towards the
final mark. To pass a module, the student must obtain a final mark of at least 50%.

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8.2

General assignment numbers

To be provided if required
8.2.1 Due dates for assignments
To be provided
8.3

Submission of assignments

Assignments should be submitted before/on the due dates. Late assignments will be marked
and commented on as part of the learning of students, but they will not be graded. Assignments
should be submitted on the accepted electronic platform used by Unisa SBL. It is currently the
EDS system.
8.4

Assignments
MBL93GX INDIVIDUAL ASSIGNMENT 01
Due date

09/05/2014

Assignment format and instructions


(1) Word limit: Your assignment, excluding the table of contents page, cover page and
appendices, must not exceed 5 000 words (i.e. 20 pages).
(2) Your assignment should include a table of contents page.
(3) Text: font: Arial (12), spacing: 1 line.
(4) All text must be justified at each margin.
(5) Your answers must include any theories, charts, tables or exhibits necessary to support your
analysis and recommendations.
(6) References: At least eight sources of reference (textbooks, journals, press reports, internet,
etc.) must be included in your bibliography.
(7) The Harvard reference style must be used.
(8) You MUST use theory/literature to support your discussion/observation and opinions. Do not
merely extract information from the interview (you will lose marks if you do so).
(9) Ensure that readings are not merely reproduced in the assignment without original critical
comments/engagement and views.
Read the interview below and answer all five questions that follow.
Managing IT transformation on a global scale: an interview with Shell CIO, Alan Matula
Over the last decade, Shell has been undergoing an IT transformation that is remarkable for the
scope of change it is seeking in one of the worlds largest and most complex organizations
one with 25 business portfolios and operations across more than 100 nations. The
transformation is defined by four phases, says Alan Matula, executive vice president and group
CIO.
The first was about going back to basics allowing Shells IT leaders to better align IT with the
business units by stabilizing operations, establishing project discipline, and tracking costs,
people, and assets. Matula says that this solid foundation is essential to any successful IT
transformation.

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In the second phase, the targets were costs and complexity. Shell rationalized and consolidated
infrastructure, substantially reduced the number of business applications, improved
procurement procedures, and aggressively off-shored. It also strengthened governance by
recognizing that a real dialogue with the businesses was needed and recruited high-grade talent
to conduct it.
Investments in the future formed the third phase: innovation, functional improvements, and
business-driven multiyear investment programs to help the businesses meet their targets. Shell
implemented strategic sourcing to consolidate hundreds of suppliers, leaving just 11 key
partners with whom it outsourced selected functions. Matula says the change in direction
allowed Shell to work with suppliers, doing things that are not only good for Shell but that also
are innovative in the marketplace and help the industry. Shell is now geared up for the harvestand-sustain phase, to ensure that the benefits of its IT investment are realized. IT is more
important and intense than ever before and that requires an ongoing effort to transform IT and
improve its agility, to make the business more productive and competitive, Matula told
McKinseys Leon de Looff, in a recent interview (in The Hague) covering Shells IT
transformation, challenges, and the many lessons learned so far.
Question: Shell has been in the midst of an IT transformation for several years now. Can you
tell us about how it started and about the approach you took?
Alan Matula: It was a phased approach that started in the early 2000s with a drive to get back
to basics. I was very fortunate to be a part of that effort from the beginning, continuing over the
four phases, since I held positions as a business CIO and now as group CIO. The phases
addressed specific goals: back to basics, rationalization and consolidation, investing in the
future, and harvest and sustain.
Question: What do you need to launch an IT transformation at this scale?
Alan Matula: You have to start out with a solid foundation that builds credibility with the
business. That includes stabilizing operations, implementing project discipline, and tracking
costs, assets, and people. If you dont have the foundation, then dont even start.
Question: What did Shell do to be sure that the businesses were aligned on this?
Alan Matula: Right from the start, we deliberately put business at the centre of what we do.
But the key is that we have been able to strike a balance between an IT foundation that is
standard across business units, while differentiating and catering to specific business needs
areas like high-performance computing for our exploration businesses.
Question: Did the move back to basics stir up any resistance from the businesses? And if so,
how did you deal with that?
Alan Matula: We made the application portfolio transparent, showing the businesses the real
cost and the complexity of what they had. They figured out pretty quickly that it didnt fit the
changing business models and competitive conditions in the industry, or the globalization
agenda the company had set for them.
Question: It must have been complicated given your historical legacy?
Alan Matula: You have to remember, we came from a nation-based operating model that was
successful for many years. Were turning that model on its head. So you basically go nation by

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nation, region by region, and replace a lot of the legacy assets and start to initiate your
standardization agenda to attack costs and complexity.
Question: CIOs debate whether IT should follow business change or lead it in your case, for
example, by furthering Shells globalization through IT standardization. What is your view?
Alan Matula: I see it somewhat differently. IT is like cement to the standardization activities. If
you dont cement changes with IT, then over time they will erode and revert back. IT provides
the transparency that you need for driving standardization in a large, diversified corporation like
Shell.
Question: Youre now a few years into the campaign. What has changed?
Alan Matula: We went from hundreds of national enterprise resource programs to about six to
eight core platforms that do the heavy lifting in terms of business transactional capability. For
example, we now have one HR system, one health system, and three or four big application
landscapes per business sector.
Question: And what about the applications that have to be tailored for business needs?
Alan Matula: In addition to the core platforms, we divided the business into portfolios around
key sectors such as upstream, downstream and corporate functions. But to really align IT
directly to the business strategy, you need to go one layer deeper. So for downstream
operations, that means retailing and manufacturing; for upstream, its exploration and
production. In total, we have 25 business portfolios.
Question: Are these managed differently?
Alan Matula: Thats where weve put our key talent in terms of IT capability. Because of their
business domain knowledge, these are the people who really get a seat at the table with
business leadership teams. They understand the business strategies and can create the
differentiating IT on top of the business transactional layer. A lot of what we consider
competitively differentiating is kept in house. Even though you read a lot about outsourcing, the
key differentiating systems are still kept and managed specifically within Shell.
Question: Stepping back a bit, how does a CIO build the business case one that
demonstrates the benefits of a broad transformation that involves major investments and a lot of
change?
Alan Matula: Weve learned for sure that when you make the business case, you have to
ensure accountability for delivery of the benefits. You need the names of the people who are
going to extract the gains. Then you need to track benefits on an ongoing basis. Were piloting
quarterly monitoring where you look at an applications portfolio and examine where benefits are
materializing and where they arent. Beyond that, you have to have the right people at the
business interface. They are invaluable. You will not find a CIO who doesnt struggle with finding
talent for the business interface. Weve invested in our IT people through a learning program
delivered by a business partner program.
Question: What role is IT playing in Shells innovation efforts?
Alan Matula: We review each of our major portfolios every 18 to 24 months, focusing on the
key technologies needed to stay in the game as well as what is needed for competitive
differentiation. We have done some very innovative things in Telematics, for example, using
wireless technology to monitor auto fuel consumption and efficiency. But the key to innovation is

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having a real dialogue at the business-portfolio level to understand where technology is
important. That means a change of mind-set and skills, moving from a focus on the basic
infrastructure of business administration to a position as close to the business leaders needs as
possible.
Question: What was the reasoning behind consolidating suppliers and outsourcing? How did
your thinking evolve?
Alan Matula: We actually tested outsourcing early in phase two, but we backed away from it
because we didnt want to outsource IT problems we hadnt fixed. Once we were comfortable
with our progress, we started the third phase. We spent almost a year bringing in suppliers 10
or 15 of them exploring what was working, what wasnt, and what needed changing. It was
then that we latched on to multisourcing as a model. For example, in infrastructure, we now
have three suppliers that are capable of providing services across the board. This provides us
with flexibility and agility as we evolve the delivery model to respond to the changing IT market
and Shell business needs. We benchmark the suppliers, and we have written contracts that are
very flexible.
Question: Is there an optimum number of suppliers for a company like Shell?
Alan Matula: Things do not stay the same forever. But to give you a sense of our thinking,
before we consolidated our infrastructure suppliers, we had about 1,500 different contracts,
covering licenses, hardware, and services, with an outsourcing model that was very
fragmented. Were now down to three infrastructure suppliers, and these are an integral part of
what we call our ecosystem of key suppliers.
Question: Was there a driving philosophy behind the new outsourcing model and the new ways
of working with suppliers?
Alan Matula: We started with the idea that we wanted 70 percent of our spending to be
external. Of that, we wanted 80 percent to be focused on the top 11 suppliers. We put those 11
into three groups: First, there are the foundation suppliers, those in which we make long-term
bets Cisco, Microsoft, Oracle, and SAP. Then theres the infrastructure group, with three
bundles AT&T, HP, and T-Systems for networks, end-user computing, and hosting of
storage, respectively. And finally we have four application services suppliers Accenture, IBM,
Logica, and Wipro. What were doing differently is bringing all 11 of them together to work as a
collective.
Question: Tell us more about that last point.
Alan Matula: About two years ago, we began meeting with the ecosystem suppliers every
quarter. We started out slowly, defining golden rules and how we operate, with the ambition of
actually doing things together that not only are good for Shell but that also are innovative in the
marketplace and help the industry.
Question: What kinds of innovation?
Alan Matula: The boundaries between the traditional suppliers are blurring. Some traditional
hardware suppliers are going into software and vice versa. Others are getting into the data
centre business. As we started to give our top 11 suppliers some big challenges, that gave rise
to some innovative approaches. Youre starting to see all suppliers wanting to play differently by
collaborating to improve the overall delivery to Shell. I think its going to be an exciting time as
we continue to push current industry norms to drive greater degrees of collaboration, change,
and innovation.

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Question: You think of IT in terms of phases. What is the next frontier for IT transformation at
Shell?
Alan Matula: The next phase in our transformation will be a shift to harvesting the benefits from
the assets we have put in place a new system for HR should last 15 years. So the goal now is
to leverage these assets to improve business performance. Thats a different model of change.
It forces us to be more intimate with the business, actually putting business operations and IT
operations side by side. In the project mode of recent years, you could keep some distance as
you restructured, but in the harvest-and-sustain mode, you have to work to optimize the
business processes, with IT delivering business performance improvements. The structural
approach will be different, and thats what were now exploring.
Question: Going forward, since youre trying to capture benefits outside IT, you need a different
steering mechanism and metrics beyond just reducing IT unit costs, right?
Alan Matula: The pressure to reduce unit costs will never go away in IT. But when you get to
harvest and sustain, its about smarter demand management, to make sure you are using only
the IT that you require and are doing only the IT projects that you need to do. Its also about a
different set of metrics on the business side, and the ultimate art of this is talking to the
businesses in their own terminology, to show exactly where IT contributes to their goals. Were
testing a couple of portfolios to see if we can do this. Its something that every CIO would love to
be able to do. Its about smarter demand management, to make sure you are using only the IT
that you require and are doing only the IT projects that you need to do.
Question: Are you doing your own IT research to develop innovations for the business?
Alan Matula: At the beginning of each year, we carve out key technology areas or domains that
we want to mine things like sensors, high-performance computing, new ways of working. We
work with the external providers as well as internally searching for areas where we can make
disruptive, differentiating strikes. In terms of structure, we have put all IT technology research
into a projects-and-technology organization with a chief technologist whose job is to look for
those technology strikes that add the most business value. We want to send the message that
the CTO is a business partner at a very different level from standard IT. The projects-andtechnology organization is split from the rest of the IT function, and theres a cut line between
the big technology plays and supporting staff 20 percent of the total staff versus the more
incremental activities that remain in the traditional IT line, or 80 percent of the staff.
Question: You have recently changed how you govern IT, with the business unit CIOs now
reporting to the IT function and no longer to the business heads. Is this the optimal model?
Alan Matula: Its really about maturity. In the early phases, there was no way you could
consolidate IT under one function. We needed to build credibility with the businesses, and they
needed to take ownership of their project portfolios. In todays phases, maturity starts to
blossom. The CIOs get more and more credibility. As long as they still have that seat at the
business table, are heavily engaged, and serve on business forums and leadership teams, then
that is what is really important. If that starts eroding, then well go back to the previous model.
Question: The change in governance more or less coincided with the start of the recession?
Alan Matula: Thats right. I now have more levers to pull when it comes to costs and agility. The
new governance model has allowed us to move faster and make decisions without working
across different business lines to get everyone to agree. Furthermore, we can move IT
resources around easier and more quickly.

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Question: In the financial crisis, some CIOs have focused primarily on cutting IT spending,
while others have focused on ITs important role in cutting business costs. What has been your
experience?
Alan Matula: You have to do both. We have, for example, made use of the network for
telephone calls, and we have transformation projects in place that use technology so we can
work virtually. But its a balance. You need to keep driving down pure IT costs on a unit basis
while also providing technology that drives business costs down. Of course, its always hard to
tell that latter story, since its often difficult to determine the full cost of a business process.
Question: While you have pushed standardization and sourcing to the maximum level, is it still
possible to squeeze more costs and inefficiencies out of IT operations?
Alan Matula: There are new models emerging, based on cloud computing and software as a
service, that are going to have an impact. Beyond that, we have to be a lot more selective about
what projects we do, and most of all we have to work for continuous improvement to get the full
potential from our IT assets.
Question: What are the lessons you have learned from this transformation? What might you
have done differently and what would you tell other CIOs?
Alan Matula: IT is more important and intense to the enterprise than ever before, and that
essentially requires an on-going effort to transform IT; there is always another phase. To support
that mental model, the first thing is to never lose the perspective that youre here to make the
business more productive and more competitive. Our catchphrase, business at the centre,
keeps us grounded. Our position today is a reflection of the tight integration that we have with
the business, combined with the efforts of key support functions like HR, finance, and
procurement.
A second thing is that youre only as good as the talent that you have. For instance, in the
robust sourcing of infrastructure and applications we have put in place, the people at the
interface are very important. They manage the critical supplier relationships with CEOs and top
executives at these firms, and they have the technical know-how to help guide the suppliers.
Finally, if you dont have the basics right, you wont have any credibility. It only takes one bad
go live on a project or a flaw in your basic delivery capabilities to set you back very quickly.
Source: (Leon De Looff, McKinsey Quarterly)

QUESTION 1

(please check assignment rules above)

(20 MARKS)

Consider Matulas statement: The first was about going back to basics allowing Shells IT
leaders to better align IT with the business units.
Explain why it was essential for Shell to align its IT strategy with its business strategy?
QUESTION 2

(20 MARKS)

IT is more important and intense than ever before and that requires an on-going effort to
transform IT and improve its agility, to make the business more productive and competitive.
With regard to the above statement, explain the ways in which Shell can make its business
more productive and competitive through IT transformation.

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QUESTION 3

(20 MARKS)

Outline the strategies adopted by Shell to deal with each of the following:
3.1
3.2
3.3
3.4
3.5

Resistance to change
Innovation
IT research
Governance
IT cost cutting

QUESTION 4

(20 MARKS)

Matula mentions the emergence of cloud computing as having a major impact on corporate IT.
Explain the concept of cloud computing and discuss the benefits it offers.
QUESTION 5

(20 MARKS)

Shell is one of the worlds largest and most complex organisations, with 25 business portfolios
and operations across more than 100 nations. Discuss the IT challenges that Shell is exposed
to with regard to the following:
5.1
5.2
5.3

Networking and connectivity


Security
Managing in a global environment
End of Assignment 01
MBL93GX INDIVIDUAL ASSIGNMENT 02
Due date

08/08/2014

Assignment format and instructions


(1) Word limit: Your assignment, excluding the cover page, table of contents page and
appendices must not exceed 5 000 words (i.e. 20 pages).
(2) Your assignment should include a table of contents page.
(3) Text: font: Arial (12); spacing: 1 line.
(4) All text must be justified at each margin.
(5) Your answers must include any theories, charts, tables or exhibits necessary to support your
analysis and recommendations.
(6) References: At least eight sources of reference (textbooks, journals, press reports, internet,
etc.) must be included in your bibliography.
(7) The Harvard reference style must be used.
(8) You MUST use theory/literature to support your discussion/observation and opinions. Do not
merely extract information from the interview (you will lose marks if you do so).
Ensure that readings are not merely reproduced in the assignment without original critical
comments/engagement and views.

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E-cigarette makers ads echo tobaccos heyday
Electronic cigarettes may be a creation of the early 21st century, but critics of the devices say
manufacturers are increasingly borrowing marketing tactics that are more reminiscent of the
heady days of tobacco in the mid-1900s.
With American smokers buying e-cigarettes at a record pace annual sales are expected to
reach $1.7 billion by years end e-cigarette makers are opening their wallets wide, spending
growing sums on television commercials with celebrities, catchy slogans and sports
sponsorships. Those tactics can no longer be used to sell tobacco cigarettes, but are readily
available to the industry because it is not covered by the laws or regulations that affect the
tobacco cigarette industry. The e-cigarette industry is also spending lavishly on marketing
methods that are also still available to their tobacco brethren, including promotions, events,
sample giveaways and print ads.
The Blu eCigs brand which recently added the actress Jenny McCarthy to its roster of star
endorsers, joining the actor Stephen Dorff spent $12.4 million on ads in major media for the
first quarter of this year compared with $992,000 in the same period a year ago, according to
the Kantar Media unit of WPP. And ad spending in a category that Kantar Media calls smoking
materials and accessories, which includes products like pipes and lighters in addition to ecigarettes, has skyrocketed: from $2.7 million in 2010 to $7.2 million in 2011 to $20.8 million last
year.
In the first quarter of 2013, Kantar Media reported, category ad spending soared again,
reaching $15.7 million, compared with $2 million in the same period a year ago. In fact, that
$15.7 million total exceeded the spending for ads in major media for tobacco cigarettes, at
$13.9 million, according to Kantar Media.
It is beyond troubling that e-cigarettes are using the exact same marketing tactics we saw the
tobacco industry use in the 50s, 60s and 70s, which made it so effective for tobacco products
to reach youth, said Matthew L. Myers, president of an organization in Washington, the
Campaign for Tobacco-Free Kids, that has fought for decades against aiming cigarette ads at
minors.
The real threat, he added, is whether, with this marketing, e-cigarette makers will undo 40
years of efforts to deglamorise smoking.
Makers of e-cigarettes counter that their marketing efforts are legal and intended to reach adults
particularly, they say, adults who smoke tobacco cigarettes.
Our company is being built on branding, said Elliot B. Maisel, chairman and chief executive at
the Fin Branding Group in Atlanta, which last month began running television commercials for
its Fin e-cigarette to accompany other initiatives like print and online ads. The company plans to
spend more than $8 million this year to take advantage of the opportunity to build a great
American iconic brand, he added.
Joana Martins, vice president for marketing at Fin Branding, described the Fin ads as aimed at
adult smokers, 25 to 44, who are tired of being ostracised and would be receptive to a pitch
that its O.K. to smoke again. That is reflected in the campaign theme, Rewrite the rules.
There is another reason that e-cigarette makers are appropriating the marketing playbook of
tobacco cigarettes beyond the proven effectiveness of tactics like advertising on television and
sponsoring race cars: giant tobacco companies like Lorillard and Reynolds American, which sell
traditional smokes like Newport and Camel, are entering the e-cigarette category alongside
smaller, entrepreneurial outfits like Fin Branding. Big Tobaccos arrival is coming through
acquisitions (e.g. Lorillard bought Blu eCigs last year) and start-ups (e.g. Reynolds American is
introducing an e-cigarette named Vuse).

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A selling point in a campaign for Vuse that began this week in Colorado is that it is designed by
tobacco experts to deliver a perfect puff every time, said Stephanie Cordisco, president of the
R.J. Reynolds Vapor Company division of Reynolds American in Winston-Salem, N.C.
(In A perfect puff every time, you might hear an alliterative echo of classic tobacco cigarette
slogans like Not a cough in a carload, A treat instead of a treatment or Light up a Lucky).
I spent a lot of my career working with Camel, Ms. Cordisco said, under the marketing
restrictions that affect how tobacco cigarettes are sold.
Obviously, Im very excited, she added, to be able to use media like television and radio to
promote Vuse. Its a major consumer win, because consumers have access to information.
Matt Coapman, vice president for marketing at Blu eCigs in Charlotte, N.C., said: Our target
audience is adult smokers. Where we can reach those adult smokers, were going to try our
best to get in front of them.
As the category increases in sales, so will the marketing dollars follow, he added.
Lorillard intends to spend $30 million on marketing this year for Blu eCigs, Mr. Coapman said,
including a renewal of the endorsement agreement with Mr. Dorff for another year, at least.
Celebrities who endorsed tobacco cigarettes back in the day included, in addition to film and
television stars, athletes, singers, doctors and even cartoon characters like the Flintstones.
A point made by the e-cigarette industry and its supporters is that electronic smokes offer an
alternative to tobacco cigarettes that may be less harmful.
Whether e-cigarette products, responsibly marketed and properly regulated, could help people
quit smoking and reduce tobacco use is a fair question, Mr. Myers said.
But what we see in the marketplace is something entirely different, he added. The people who
are making them are behaving more like the tobacco industry than like people who care about
public health.
(Source: The New York Times, Business Day, by Stuart Elliott, 2013)

Your prescribed book (Trott 2012, ch 12, p 417) refers to various types of innovation, namely
product, service, organisational and market innovation. Trott (2012) also talks of the nature of
innovation that is disruptive and sustaining innovation. The book highlights the importance of
innovation and how the effective management of that process may lead to corporate success.
The case study taken from the New York Times, Business Day clearly demonstrates the
manifestation of innovation, and argues the appropriateness of this innovation.
QUESTION 1

(please check the assignment rules above)

(30 MARKS)

Using examples (not necessarily from the case study) explain these types (disruptive and
sustaining) and different natures of innovations.
QUESTION 2

(30 MARKS)

What advice would you give to e-cigarette makers about approaching the evident competition in
the cigarette market, specifically via innovation as a strategic tool?
QUESTION 3

(40 MARKS)

In your discussion, include and list the possible implications for South African firms and
smokers? Justify your selection/claims.

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End of Assignment 02
8.5

Marking guideline/matrix/rubric

There are good, not-so-good and bad assignments. Good assignments are creative, wellstructured documents in which the thinking processes behind the assignment may be traced. An
integration of practice and theory is of the utmost importance. Referencing is important and we
expect you to include a proper bibliography.
Topic/item

Max mark

Quality of presentation

10

Quality of analysis

35

Recommendations

35

Overall impression

10

Referencing

10

TOTAL

100

9 OTHER ASSESSMENT METHODS


The summative assessment will be in the form of a written examination.

10 EXAMINATION
The examination paper may contain of short questions, case studies, calculations and
scenarios. More details about the examination will be provided during the study school or closer
to the examination.

11 FREQUENTLY ASKED QUESTIONS


These will be formulated throughout the year and during the study school(s)

12 SOURCES CONSULTED
The main sources of information are given above.

13 CONCLUSION
The life cycles of products have been decreasing steadily in the last 50 years. Hence innovation
is essential, but it is difficult and risky, and it demands a lot of resources and skills and it is
certainly no walk in the park. In today's uncertain economic environment, where costs are
escalating, budgets are shrinking and resources are scarce, IT organisations are continuously
faced with the challenge of prioritising projects, eliminating unnecessary spending and
maximising ROI. If companies are going to succeed they need effective information systems
which must support the firms e-business and e-commerce management processes. In so doing,
firms will be able to react faster to changing business pressures and align their IT strategies and
resources with their business strategies.

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14 ADDENDUM
There are no further addenda to this tutorial letter.