GIS and Business Strategy

Chapter 12 Slides from James Pick,

Geo-Business: GIS in the Digital Organization,

John Wiley and Sons, 2008.

Copyright © 2008 John Wiley and Sons.

DO NOT CIRCULATE WITHOUT PERMISSION OF JAMES PICK Copyright (c) 2008 by John Wiley and Sons

Objectives of Lecture

• Evaluate the strategic and competitive role of GIS. Consider Michael Porter’s theory of internet strategies and the IT strategic alignment model.

• Propose an evolutionary framework for business uses of spatial technologies • Discuss in more detail nine case studies that illustrate the framework.

• Discuss the overall research case-study results.

• Point out the impact of the results on the evolutionary model • Point to practical implications for managers • Conclude Copyright (c) 2008 by John Wiley and Sons

Vision for Strategy

• Attaining industry leadership with spatial technologies also requires the that add value. strategies over many years. crucial.

vision

to foresee years into the future to a spatially-enabled business with GIS and associated technologies providing sustained efficiency and productivity • This points to leaders in these firms who fostered or developed the vision, gained commitment of stakeholders, and led in making it happen through implementation of the • The intangible leadership factors are also Copyright (c) 2008 by John Wiley and Sons

Corporate Strategy and GIS Strategy need to be in Synchrony

• The corporate strategic plan includes the firm’s mission, guiding objectives, mid-term milestone to reach the objectives, sub-plan for development of employees, and section on how stakeholders have been involved in establishing the strategic plan (Tomlinson, 2003; Applegate et al., 2007). • The firm needs to have leaders in GIS who will take the initiative to formulate strategies and gather the support of company top leadership to include GIS in its business strategies. • The GIS plan needs to be in synchrony with the corporate strategic plan. It is a breakthrough point at which top leadership understands that GIS is strategic for the organization (Tomlinson, 2003). Copyright (c) 2008 by John Wiley and Sons

IT Alignment Theory

• The IT strategic alignment model (Henderson and Venkatraman, 1992; Papp, 1995; Papp, 2001; Applegate et al., 2007) divides strategy into four quadrants - business strategy, IT strategy, organizational infrastructure, and IT infrastructure.

• Relationships between these quadrants determine the extent to which business and IT strategies and infrastructure operate in synergy.

• The model postulates the closer the alignment that exists between the quadrants, the greater the synergy. Copyright (c) 2008 by John Wiley and Sons

IT Alignment Theory (cont.)

• The model postulates the closer the alignment that exists between the quadrants, the greater the synergy. In aligning business and IT capabilities, for example the business administrative structure and IT architecture need to be consistent (Papp, 2001). • Likewise the strategies and infrastructures need to be consistent, – For instance IT strategy may call for a spatially-enabled supply chain but the IT infrastructure (people, expertise, networks, RFID equipment) may not be sufficient to support it. • A firm’s strengths and weaknesses in the quadrants can help determine where investment needs to be prioritized and what results can be expected (Henderson and Venkatraman, 1992; Papp, 2001). Copyright (c) 2008 by John Wiley and Sons

Business-IT Strategic Alignment Model

Copyright (c) 2008 by John Wiley and Sons (Source: Papp, 2001)

Business-GIS-IT Strategic Alignment Model

• The IT alignment model can be extended to include GIS Strategy and GIS Infrastructure. • Now the alignment needs to exist between six cells, which requires more time and resources in planning, coordination, and communication. • If the IT and GIS functions and organizational units are combined together, then the functional integration becomes simpler, again with only four quadrants, and similar to the Bus.-IT Alignment Model.

• However, based on the research cases in the book, the GIS and IT functions are more likely to be separate, with loose connections. • Regardless of the arrangement, this theory stresses that GIS strategy can succeed only if effort is made to align it with business and IT strategies, as well as have a fit between GIS strategy and infrastructure.

Copyright (c) 2008 by John Wiley and Sons

Business-GIS-IT Strategic Alignment Model

Copyright (c) 2008 by John Wiley and Sons (Modified from Papp, 2001)

Evolutionary Framework for GIS Strategy

• An evolutionary framework for GIS Strategy takes into account three key dimensions:

(1) extent that spatial applications are customer-facing, (2) extent that geography is part of the industry or business, and (3) extent that the industry or business utilizes a spatially-enabled enterprise-wide integration platform.

Copyright (c) 2008 by John Wiley and Sons

Dimension 1 of Evolutionary Framework

• The first dimension of the framework consists of the extent that spatial applications in the industry or company are directed towards a user base that is predominantly customers (i.e. customer facing) versus spatial applications that are directed towards internal users. – Internal users include executives, managers, marketing specialists, middle-level analysts, operations personnel, sales force, and field workers. Copyright (c) 2008 by John Wiley and Sons

Dimension 2 of Evolutionary Framework

• The second dimension, extent of geography as part of the business, refers to whether the major business products and processes relate closely to geography. – An example of an industry linked to geography is transportation, for which the key function of moving goods, inventory, and people is inherently tied to geography; – Another example is the utility industry, for which the products of energy, purified water, and essential materials are provided through geographic networks of transmission lines, pipelines, and specialized transport vehicles. – Real estate, another obvious example, has land as its central element. • On the other hand, the legal services industry has slight linkage with geography for its essential products and processes. Copyright (c) 2008 by John Wiley and Sons

Dimension 3 of Evolutionary Framework

• The extent that an industry or business utilizes a spatially-enabled web integration platform refers to whether it is based on “traditional” desktop or client-server spatial applications versus those based on the web-based enterprise architecture consisting of web servers, content servers, the internet, thin and thick clients Copyright (c) 2008 by John Wiley and Sons

Evolutionary Framework of Industry Categories by 2 Spatial Dimensions, 1995 Copyright (c) 2008 by John Wiley and Sons

Evolutionary Framework of by Firms by 3 Spatial Dimensions, 2006 Copyright (c) 2008 by John Wiley and Sons

Research project to classify case firms on this framework and observe patterns

• 20 research cases were interviewed over a one year period to determine their uses and applications of spatial technologies, users, extent of web and location-enabling, consumer-facing vs. internal uses, traditional vs. enterprise, costs-benefits etc.

• The companies are a convenience sample from different industries and firm sizes.

• The interviewee was the person in charge of GIS at the firm.

• The findings from the cases are useful in determining the current configuration of spatial applications and uses by industry and to analyze how they fit into the proposed framework. – It will lead to more complete and larger-sample studies to determine the industry-based evolution of spatial technologies.

• Nine cases are discussed in more detail : Big Oil, 2 Large Banks, Large Insurance, Rand McNally, Lamar Advertising Co, Prudential Preferred Properties, Motion-Based Technologies Copyright (c) 2008 by John Wiley and Sons

Case 1. Big Oil

• Global integrated oil giant, with over 50,000 employees, over $100 billion in revenues, and business in 180 nations.

• Spatial technologies applied enterprise-wide including in exploration, transportation and storage, refining, environment, marketing, supply chain, and strategic planning.

• Spatial technologies are advanced technically in exploration, with 3-D and modeling.

• The company has been using client-server based GIS in its small corporate GIS group and in other specialized groups scattered around the firm. It hasn’t consolidated its GIS organizationally not linked GIS together through an enterprise web bus.

• Overall, GIS is very strategic in tracking and taking on IO’s competition at many levels.

Copyright (c) 2008 by John Wiley and Sons

Case 3. Large Commercial Bank

• This bank headquartered outside the U.S. is one of the world’s largest. • The case-study interview concerns the USA division of the bank, which puts emphasis on consumer and commercial banking. Over the past five years, it has undergone major growth in its USA branch network. • GIS is used for branch siting and relocation, trade area analysis, market share studies, and ad-hoc thematic mapping. • The GIS group is very small with a traditional, client-server set up. • A strength of the spatial group is the strength of spatial data holdings on customers, branches, and associated demographic attributes. • GIS is not regarded as strategic and competitive. It’s not in the strategic plan and the executives are not focused on it. The small GIS group is aware of its potential but has not yet been able to convince bank management and strategists of its competitive importance.

Copyright (c) 2008 by John Wiley and Sons

Case 5

• This large private firm is the world leader in map publishing. GIS permeates its workforce, from executives down to operations personnel. • GIS is used to create and update its map and electronic products, direct store delivery (DSD) i.e. locating and stocking retail outlines that carry its products, manage inventory including as it relates to supply chain, and provide specialized maps to marketing and planning departments. • Most of the GIS users are internal, but some are external, including industry users of electronic products and consumers who utilize cell-phone and web map services. A recent web based product is consumer-produced laminate wall maps. After a customer requests what map area to produce, the map is customized to high standards and express-shipped to him/her. • GIS is integral to the firm’s competitive strategy, both in terms of production of paper and electronic map products, and in optimal siting and stocking of products in retail facilities and accounting for the firm’s inventory spatially. Copyright (c) 2008 by John Wiley and Sons

Case 6. Lamar Advertising Corporation Locating Billboards in the United States

• • •

Business Drivers:

– Advertising customers save money by choosing the billboard locations with the maximum market exposure

Solution:

– Lamar’s marketing workforce has access to web-based spatial system that enable them to help customers select the best vacant locations for their billboard in metro areas.

– That system narrows the sites to those with the most marketing exposure.

– Maps are shown and photos can be added showing in detail the views of the final set of locations.

Issues:

– The data-bases and digital map layers need to be updated continually, so the customer is being presented with the current reality.

Copyright (c) 2008 by John Wiley and Sons

Lamar Advertising Company in Baton Rouge, Louisiana, provides customers with alternative vacant billboard locations with maps, photos, and narrative descriptions. This gives the customer more information to make a decision.

Copyright (c) 2008 by John Wiley and Sons Source: ESRI, 2005

Case 7. Western Exterminator Case Study

• Western Exterminator is a privately owned pest control firm with 650 employees in 3 western states (CA, NV, and AZ).

• It uses traditional desktop GIS, combined with an ESRI ArcWeb Services subscription. That service provides demographic, geographic, and other data-sets, and is updated constantly by the service provider, ESRI. • Main use is to plot customers and attributes associated with them, especially demographic and business.

• Another use is to re-align routing of sales people. Each sales person has 100-300 customers, so the sales person is better able to optimize routes.

• Also used for improved siting decisions on new service centers, taking into account the existing 33 centers and competitors’.

• This spatial set-up has no links to WE’s ERP, CRM, web enterprise, or location-based systems.

• The moderate strategic advantages are to target homeowners, locate service centers, and recognize underserved areas.

Copyright (c) 2008 by John Wiley and Sons

Case 8 Prudential Preferred Realty

• The firm is a Chicago-area residential real-estate brokerage firm, with an agent staff of 500. It’s a franchise of Prudential Insurance. GIS’s primary use is for map listings for customers and consumers. Internally, it’s applied for demographic analysis of zones to see what areas have more selling over time and for agent performance profiling by area. • The spatial applications are entirely based on an enterprise web architecture. The consumers and customers have been attracted by the competitive web portal that allows them to search and view properties with convenient tools and imagery of the city areas, amenities, and properties themselves.

• Spatial is strategic, since it’s a technology in this industry for now that allows Prudential Preferred to stay “ahead of the pack.” Strategically it allows the firm to create customer loyalty by robust, repeatable spatial services. This competitive importance of spatial is not formalized in a written plan but the firm generally does little written planning.

Copyright (c) 2008 by John Wiley and Sons

Case 9. Garmin

• Garmin, a medium sized international firm, purchased MotionBased (MB) Technologies in Sausalito, CA, is a small spatial firm, in Oct. of 2005 and it became a Garmin division.

• It provides spatial web services and analysis for endurance athletes, such as runners, climbers, and sailors worldwide.

– A typical user is an endurance athlete, who wears a Garmin or other GPS-enabled mobile device during training sessions.

– Data are recorded 4 data points -- 3-D + time. Uploaded to MB’s web server. – Web server performs profile analysis of the individual athlete, as well as comparison with aggregate results from data-warehouse of the population of athletes. These analyses give tabular and map results to the desktop, but do not yet provide maps back to the mobile unit.

– 10 percent of customers elect to develop their own application user interfaces (APIs), but their customer data are still added to the MB’s web-based data warehouse.

Copyright (c) 2008 by John Wiley and Sons

A current MB goal is to deliver performance maps and tables back to the mobile device, for viewing during training.

==================== Quote from Clark Weber, manager of Garmin’s MotionBased Division, “Yes but web services more important…[than GIS and spatial technologies]….. It [Garmin] purchased MotionBased for web services expertise.”

Copyright (c) 2008 by John Wiley and Sons

Copyright (c) 2008 by John Wiley and Sons

Results: Size of Firm not Tied to Strategic Level

• Size of firm has no consistent association with strategic level in the framework. Some small firms such as MapGistics and MotionBased Technologies have centered their business on spatial products and services from their founding, so spatial is immediately strategic. • Larger firms are older; many were founded decades before GIS was invented. Their adoption of spatial technologies has progressed more slowly over time through stages of growth, as outlined by Nolan’s stage theory in Chapter 3. • Medium-sized firms are in between these, and tended to have adopted and elevated the importance of GIS and spatial in shorter time spans than the large firms, for instance Chico’s and Lamar Advertising.

Copyright (c) 2008 by John Wiley and Sons

Results: Strategic Level Not Related to Extent GIS is Customer-Facing

• Strategic level is not related to extent that GIS is customer-facing. This may reflect that many GIS and strategic spatial applications for the case firms tend to be more intensive internally than externally. • Examples of internally-focused cases are Global Integrated Oil, and Rand McNally. However, extent that GIS is customer-facing does relate to type of industry. • Consumer services, billboard advertising, newspapers, and retail are industries that often serve their customers directly with GIS. • By contrast, the oil and utilities industries are more proprietary about retaining geographic information for inside use. Copyright (c) 2008 by John Wiley and Sons

Results: Strategic Level Related to Extent of Geography in the Business

• Spatial strategic level is positively related to extent of geography in the business. • Extent of geography in the business is also keyed to industry characteristics. For the twenty research cases, those with the largest geographical component come from oil and gas, utilities, real estate, insurance, retail, and consumer services, while geography is less important for banking and consulting. Copyright (c) 2008 by John Wiley and Sons

Results: Strategic Level Related to Spatial Web Platform

• In comparing the extent the twenty firms are highly strategic in GIS to the adoption of spatially-enabled enterprise-wide web integration platforms, the two attributes are highly associated for this sample. • This strong tie confirms a premise of the book that the spatially-enabled, enterprise-wide web integration platform is the direction that spatial technologies are moving to achieve competitive results. • This finding is explained by Porter’s theory that justifies the advantages of the internet to successful corporate strategy (Porter, 2001). Examples: Prudential Preferred Realty and MotionBased Technologies. • IT strategic alignment theory reinforces that the spatial web-integration platform corresponds to a corporate strategy of e-business (Porter, 2001 Copyright (c) 2008 by John Wiley and Sons

Drawing the Best GIS Strategies

• The implication from the 20 research case studies is that a company should evaluate its industry to determine how suitable it is to spatial technologies, as well as to gauge how much competitive advantage these technologies offer the firms in the industry (Hagel and Brown, 2001). • A firm should consider deploying spatial applications on web-services platforms, as long as it can rationalize the investment from a cost-benefit standpoint and support it technologically. • A managers should assess how naturally geographical its business is, to help in determining the strategic potential of GIS for his/her company. Once underway with GIS, corporate management should consider evolving the applications to an enterprise-wide web based platform. Copyright (c) 2008 by John Wiley and Sons

Practical Implications of Alignment of GIS and Corporate Strategy

• Another practical implication of the cases for managers is that the alignment of GIS strategy with corporate strategy is recommended, but with a difference. GIS applications need to be aligned with corporate strategy and also with IT strategy. • For most firms, GIS and IT are separated, so coordination of their strategic planning might be problematic. Norwich best represents this problem. It has had limited coordination and communication between GIS and IT. On the other hand, for firms such as Sears and Rand McNally, GIS and IT work together well including in coordinating strategies. Copyright (c) 2008 by John Wiley and Sons

Copyright (c) 2008 by John Wiley and Sons

A Note on Government GIS

• Government units are less competitive, but still must have strategy in place in order to excel among their many peers, achieve public support, and resources to develop GIS and spatial applications further.

• The same principles apply to government as covered with private sector examples, except “competition” is replaced with “excel as a technology and among peer government entities.” Copyright (c) 2008 by John Wiley and Sons

Summary

• Spatial technologies are growing rapidly in business and present new research territory for IS and other academic business researchers. Spatial IS published research has so far been slight.

• Many general and known IS concepts and theories can be applied, but they need to be significantly modified by considering geography and spatial methods. • Traditional GIS is still important, but spatial technologies today are expanding to include enterprise, location-based, and web-service integration platforms • The study shows that there is a relationship between adoption of spatial enterprise web approach and higher strategic level for spatial applications.

Copyright (c) 2008 by John Wiley and Sons

Summary (cont.)

• A classification framework is given for the evolution of spatial technologies in business.

• An interview research study was conducted of 20 business cases to validate the framework and suggest relationships and point to future research.

• Results indicate that firms vary on spatial strategic positioning based on 3 dimensions.

• Proactive management can effect successful spatial applications with greater strategic impact.

Copyright (c) 2008 by John Wiley and Sons