Business IT Alignment The 2 nd Session - What is Business - What is IT - What Is strategy - What is Alignment

1. Business IT AlignmentThe 2nd Session - What is Business - What is IT- What Is strategy - What is Alignment September 45th, 2013

4. Supply – Demand – Products – Customer Relations – Benefit Logical Inventory • IT Management Integration Implement Evaluate • Strategize • Report Business Architecture BusinessStrategy Business Management BusinessITAlignment IT Governance and Planning IT Management IT Strategy IT Architecture

5. Agenda for the second class strategy and Business Architecture Why . . . How . . . • Examples of strategy • The context(s) of the strategy • Business architecture • Models • Discussions • How you think about strategy … defines, what strategies you develop. • How you think about the Businesss … determines your (mis)understanding of the Business SOA Blueprint 2.1 (SOA2.1) IT Unit of the future • Group Presentations • What is strategy … and what not • What is a Business • What is the relation • Books • Articles What . . . What else . . .

6. Strategy is everything . . . In 1805, England had a problem. Napoléon had conquered big chunks of Europe and planned the invasion of England. But to cross the Channel, Napoléon needed to wrest control of the sea away from the English. Off the southwest coast of Spain, the French and Spanish combined fleet of thirty-three ships met the smaller British fleet of twenty-seven ships. The well-developed tactics of the day were for the two opposing fleets to each stay in line, firing broadsides at each other. But British admiral Lord Nelson had a strategic insight. He broke the British fleet into two columns and drove them at the Franco-Spanish fleet, hitting their line perpendicularly. The lead British ships took a great risk, but Nelson judged that the less-trained Franco-Spanish gunners would not be able to compensate for the heavy swell that day. At the end of the Battle of Trafalgar, the French and Spanish lost twenty-two ships, two-thirds of their fleet. The British lost none. Nelson was mortally wounded, becoming, in death, Britain’s greatest naval hero. Britain’s naval dominance was ensured and remained unsurpassed for a century and a half. Nelson’s challenge was that he was outnumbered. His strategy was to risk his lead ships in order to break the coherence of his enemy’s fleet. With coherence lost, he judged, the more experienced English captains would come out on top in the ensuing melee. Good strategy almost always looks this simple and obvious and does not take a thick deck of PowerPoint slide to explain.

7. What is this strategy thingy • The word Strategy derives from the Greek word stratēgos, which derives from two words: • stratos(army) and • ago (ancient Greek for leading). • Stratēgos referred to a „military commander‟ during the age of Athenian Democracy • Strategy is profoundly different from tactics. In military terms, • tactics is concerned with the conduct of an engagement while • strategy is concerned with how different engagements are linked. • In other words, how a battle is fought is a matter of tactics: whether it should be fought at all is a matter of strategy

8. Sources of competetiveness Two complementary aspects of competition and positioning Internal External Quality of (Inter)National Business Environment Company Operations and Strategy

9. The Fundamentals of Competitive Strategy • The central goal of any company must be: superior long-term return on investment • Strategic analysis must begin with the industry, not the company • Company economic performance results from two distinct causes: • Rules of Competition • Sources of Competitive Advantage Sources of Competitive Advantage Rules of Competition Industry Structure Relative Position (within the industry)

10. Rules of Competition Sources of Competitive Advantage Rules of Competition Industry Structure Relative Position (within the industry) Industry Structure

11. Sources of Competition • The sources can be divided into two dimensions: • Existing soruces: • Suppliers • Customers • Emerging Sources: • New Entrants to the market • Substitute Products & Services Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products and Services:

12. The Five Forces • Threat of New Entrants: • The existence of barriers to entry • Brand equity • Switching costs • Capital requirements • Access to distribution • Absolute cost advantages • Learning curve advantages • Expected retaliation • Government policies When the rate of change outside exceeds the rate of change inside – the end is in sight. • Bargaining Power of Buyers: • Buyer concentration to firm concentration ratio • Bargaining leverage • Buyer volume • Buyer switching costs relative to firm switching costs • Buyer information availability • Ability to backward integrate • Availability of existing substitute products • Buyer price sensitivity • Price of total purchase • Bargaining Power of Suppliers • Supplier switching costs relative to firm switching costs • Degree of differentiation of inputs • Presence of substitute inputs • Supplier concentration to firm concentration ratio • Threat of forward integration by suppliers relative to the threat of backward integration by firms • Cost of inputs relative to selling price of the product • Importance of volume to supplier • Rivalry Among Existing Competitors: • Number of competitors • Rate of industry growth • Intermittent industry overcapacity • Exit barriers • Diversity of competitors • Informational complexity and asymmetry • Fixed cost allocation per value added • Threat of Substitute Products and Services: • Buyer propensity to substitute • Relative price performance of substitutes • Buyer switching costs • Perceived level of product differentiation

13. Examples . . . The five forces for the portals • Threat of New Entrants: • Vertical portals • The customer goes direct to the information source • The customer builds his/her own portal with software tools Example: The Five Forces in the early days of the portal business • Bargaining Power of Buyers: • Low and falling switching costs for users • Users rapidly becoming more sophisticated • Advertisers still learning how to use sites, but their power will grow • E-commerce partners will be able to by-pass sites and fees should fall • Bargaining Power of Suppliers • “Free” or low cost inputs available, especially from technology, information or product suppliers keen to get exposure on web • HOWEVER • Providers of unique content retain a powerful position • Most suppliers will have growing ability to by-pass portals over time • Qualified labour is scarce, e.g. in locations like Silicon Valley • Rivalry Among Existing Competitors: • Vigorous rivalry • Instantaneous imitation • Big players entering market intent on catching up • Threat of Substitute Products and Services: • Low barriers to entry, especially to focusers • BUT • Difficult to establish a substantial presence

14. Sources of Competitive Advantage Sources of Competitive Advantage Rules of Competition Industry Structure Relative Position (within the industry) Relative Positioning

15. Determinants of Relative Performance Types of Competetive Adavantage Lower Cost Differentiation (Non-Price Value) Differentiation Lower Cost Creating a unique and sustainable competitive position OperationalEffectiveness Strategic Positioning Assimilating, attaining, and extending best practice

16. What is Strategy … what is NOT What is Strategy What is NOT Strategy • Unique position • Tailored activities • Activities fit together in an integrated system • Clear trade-offs • Continuity of position but consistent improvement • Best practice improvement • Learning • Agility • Flexibility • Restructuring • Mergers/ Consolidation • Alliances/Partnering

17. Any Strategy has its clear trade-offs

18. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Business Strategy ... and then what .... Business Strategy Create Eliminate Increase Decrease

19. The objectives of an(y IT) strategy

20. Primary management practices for STRATEGY • Whatever your strategy, whether it is Low Pricesor Innovative Products, it will work if it is • sharply defined, • clearly communicated, and • well understood by employees, customers, partners, and investors. • Build a strategy around a clear Value Propositionfor the Customer. • Develop strategy from the outside in, based on what your customers, partners, and investors have to say –and how they behave –not on gut feel or instinct. • Continually fine-tune your strategy based on changes in the marketplace –for example, a new technology, a social trend, a government regulation, or a competitor's breakaway product. • Clearly communicate your strategy within the organization and to customers and other external stakeholders. • Keep focused. Grow your core business, and beware the unfamiliar.

21. Context of Strategy . . . - A swift review The role of strategy in the big picutre

22. Mission Vision Business Strategy Business Models Business Processes Organization Management & Governance Conceptual

23. Business Architecture spans the whole business Mission Vision Business Strategy External Demands Strategic Direction The Market Promise Customer Value BusinessStrategy Business Models Business Models Business Processes Business Processes Management IT Organisation Organization Management & Governance Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Services Solutions Information Customer Q2 D P Q1 Q3 getCustomer Customer Mgmt C A Q4 23

24. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Q4 Supply Supply Supply Offerings Offerings Offerings Value Proposition Value Proposition Value Proposition Demand Demand Demand Q3 Q1 BC Q2 Cost Cost Cost Income Income Income Profit Profit Profit Profit Profit Profit Plan Do Act Check Network Skills &Competencies Goals &Metrics BusinessPlanning Performancemanagement Organisation Business Architecture spans the whole business Business Strategy Business Models Business Processes CIMSSA NTP PAYTON Operating Model Clarification m Management Organisation

25. The Strategy Canvas The Value Curves . . .

26. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Sources of Competition Strategy Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers • The sources can be divided into two dimensions: • Existing soruces: • Suppliers • Customers • Emerging Sources: • New Entrants to the market • Substitute Products & Services Threat of Substitute Products and Services:

27. Strategy Canvas … Value Curves • Strategy canvas achieves 3 main objectives: • First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. • Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. • And finally, it illustrates the company’s strategic profile (also known as the Value Curve) by showing which factors of competition the company invests in currently and possibly in the future. • This value curve is the basic component of the strategy canvas. Market Promise Key Characteristics Feelings Emotions Benefits The Strategy Canvas and the Value Curves Strategy • Price • Openning hours • Expertice and product knowledge • Transparency of products and services • Personlised Services • Friendly service • Risk Management consultancy • Corporate dealers • Speed • Flexible payment terms • Relationship management • Ease of use • Responsiveness • Knowledge

28. Strategy Canvas for Corporate Foreign Exchange

29. Strategy Canvas for Telco Industry

30. Any Strategy has its clear trade-offs

31. External Demands Strategic Direction The Market Promise Customer Value Market Promise Key Characteristics Feelings Emotions Benefits Business Strategy ... and then what .... Business Strategy Create Eliminate Increase Decrease