Information Systems Strategic Planning

1. Information Systems Strategic Planning Chapter 5 Modified by: Dr.Heba Mohammad

2. Index • Introduction • Types of planning • Why is planning so difficult? • The World of Planning • Traditional Strategy-Making • Today’s Sense-and-Respond Approach • Five Planning Techniques • Stages of Growth • Critical Success Factors • Value Chain Analysis • Linkage Analysis Planning • Business System Planning

3. Introduction • IS management is becoming more difficult and more important at the same time: • Technology changing so fast: “Why bother?” Vs. Most organizations’ survival is dependant on technology • How to resolve this apparent paradox? • Good News = variety of approaches, tools and mechanisms available • Bad News = no ‘best’ way to go about it

4. Introductioncont. • It is important to establish the appropriate mindset for planning: • Some managers believe = “determining what decisions to make in the future” • Better view = “developing a view of the future that guides decision making today” • Strategy = stating the direction in which you want to go and how you intend to get there • The result of strategy-making is a plan

5. Types of Planning Types of Planning: • Planning is usually defined in three forms, which correspond to the three planning ‘horizons’. • Strategic = 3-5 years • Tactical = 1-2 years • Operational 6 months – 1 year

6. Why Planning is Difficult? • Business Goals and Systems Plans Need to Align • Strategic systems plans need to align with business goals and support those objectives • Some believe = “too sensitive” = PROBLEMS • Fortunately = trend for CIOs to be part of senior management • Technologies Are Rapidly Changing • How can you plan when information technologies are changing so rapidly • Disk storage  USB memories • Continuous planning? • Old days of planning at ‘start of year’ = gone • Advanced technology groups

7. Why Planning is Difficult? Cont. • Companies Need Portfolios Rather Than Projects • Projects builds systems and application not compatible with each other • How they fit into other projects and how they balance the portfolio of projects • Infrastructure Development is Difficult to Fund • Despite everyone “knowing infrastructure development is crucial”, it is extremely difficult to get funding just to develop or improve infrastructure • Mainframe  Client ERP Web service –oriented architecture • Often done under large application project • Challenge = develop improved applications and improve infrastructure over time • Responsibility Needs to be Joint • Business planning, not just a technology issue

8. The Changing World of Planning Traditional Strategy-Making: • Business executives created a strategic business plan = where the business wanted to go • IS executives created an IS strategic plan = how IT would support the business plan • IT implementation plan created = describe exactly how the IS strategic plan would be implemented

9. Today’s Sense-and-Response Approach • If yesterday’s assumptions no longer hold true, what is taking the ‘old’ approach’s place?: • Let Strategies Unfold Rather Than Plan Them: • In rapidly changing environment, it is risky to take long time in strategy articulation. • When predictions are ‘risky’, the way to move into the future is step by step using a sense-and-respond approach. • Sense a new opportunity and immediately respond via testing it in an experiment • Formulate strategy closest to the action: • Close contact with the market • Employees who interact daily with customers, suppliers and partners • Employees who are closest to the future should become prime strategists. In the ‘Internet Age’ = younger employees

10. The Changing World of Planning

11. MICROSOFT Case example: Sense and Respond Strategy-Making • Moved on to buying Internet Companies as well as aligning with Sun to promote Java • Over time = moved into a variety of technologies: • Web, Cable news, Digital movies, Cable modems, Handheld OS, Video server, Music, Multiplayer gaming • Not all came from ‘top management’ e.g. first server came from a ‘rebel’ project • Getting its fingers into every pie that might become important

12. Today’s Sense-and-Response Approach cont. • Guide Strategy-Making with a ‘Strategic Envelope’: • Having a myriad of potential corporate strategies being tested in parallel could lead to anarchy without a central guiding mechanism • Top management set the parameters for the experiments (= a ‘strategic envelope’), and then continually manage that context • Need to meet often to discuss: • Shifts in the marketplace • How well each of the experiments is proceeding • Gaining ‘followership’ or showing waning interest?

13. SHELL OIL Case example: Guide Strategy-Making with a ‘Strategic Envelope’ • New GM believed change would only occur if he went directly to his ‘front lines’ (gas station employees). Set aside 50% of his time • Goal = not to drive strategy from ‘Corporate’ (tried and failed dismally) but to interact directly with the grass roots and support their initiatives • Technique = use of action labs (6 to 8 people): • Week long retailing ‘boot camp’, peer challenges, ‘hot seats’, 60 day plan implementations, report back etc. • Projects spawned many more projects • Guidance and nurturing came from the top, so that there was not complete chaos

14. Today’s Sense-and-Response Approach cont. • Be at the Table : • IS executives have not always been involved in business strategising • This situation is untenable in today’s ‘Internet-driven’ world. • Note: first = need to make department credible • Test the Future • Need to test potential futures before the business is ready for them (thinking ahead of the business) • Provide funding for experiments • Have an emerging technologies group

15. Today’s Sense-and-Response Approach cont. • Put the Infrastructure in Place: • Moving quickly in Internet commerce means having the right IT infrastructure in place. • The most critical IT decisions are infrastructure. • Recommended that IT ‘experiments’ include those that test ‘painful’ infrastructure issues such as how to: • Create and maintain common, consistent data definitions • Create and instil mobile commercial standards among handheld devices • Implement e-commerce security and privacy measures • Determine operational platforms (ERP, Supply Chain Management …)

16. Five Planning Techniques • Stages of Growth • Critical Success Factors • Value Chain Analysis • Linkage Analysis Planning • Business System Planning

17. 1. Stages of Growth • Stage One: Early Successes: Increased interest and experimentation • Stage Two: Contagion: Interest grows rapidly; learning period for the field • Stage Three: Control: Efforts begun toward standardization • Stage Four: Integration: Pattern is repeated

18. 1. Stages of Growth cont. • The eras overlap each other slightly at points of “technology discontinuity” • Proponents of he proven old dominant design struggle with proponents of the new and unproven designs • ‘Inevitably’ the new (proven) win out • Importance of the theory is understanding where a technology or company resides on the organizational learning curve • e.g. too much control at the learning and experimentation stage can kill of new uses of technology • Management principles differ from stage to stage • Different technologies are in different stages at any point in time

19. 2. Critical Success Factors • A method developed at MIT for defining executive information needs = it focuses on individual managers and their current information needs. • Popular planning approach that can be used to help companies identify information systems they need to develop • For each executive, CSFs are the few key areas of the job where things must go right for the organization to flourish • Suggested fewer than 10 per executive • Time dependent (must be re-examined)

20. 2. Critical Success Factors cont. • Four sources: • Industry the business is in: each industry has CSFs relevant to any company in it. • Company itself and situation within industry: actions by large companies usually provide CSFs for small companies in that industry. • Environment (consumer trends, the economy, political factors): ex. Few executives have listed “leveraging the internet” as CSF. Today must do • Temporal organizational factors (ex. too much or too little inventory) • Two types: Monitoring Vs. building CSFs • Used to determine factors critical to accomplish corporate goals and objectives and corresponding measures • CSFs can be used to identify IS plans that need to be developed

21. 3. Value Chain Analysis • Five primary activities that form the sequence of the value chain and Four supporting activities that underlie the entire value chain

22. 3. Value Chain Analysiscont. Virtual Value Chains – information substitutes for physical products and physical location. • Treat information as a source of value not only a support element, ex. FedEx and UPS. Using Information to add value: 1. Making operations visible: see physical operations through information Ex. Sales info, competitors promotions, new competitive products  better production to match demand, route trucks effectively, tailor promotions…

23. 3. Value Chain Analysiscont. 2. Mirroring capabilities: substitute virtual activities for physical ones Ex. The rental car subsidiary turned to auctioning over the internet, dealers can view the cars (and their stats) to be auctioned and then place bids during the online auction The auction saves them time and effort, and the cars are guaranteed 3. Space-based customer relationships: delivering value to customers in a new way Ex. Collecting information about the customer and making it available company-wide so that employees can answer to their needs, customize products, offer better service.

24. 4. Linkage Analysis Planning • Examines the links organizations have with one another with the goal of creating a strategy for utilizing electronic channels • Methodology includes three steps: 1. Define power relationships among the various players and stakeholders: • Identify who has the power • Determine future threats and opportunities for the company

25. 4. Linkage Analysis Planningcont. 2. Map out your extended enterprise to include suppliers, buyers, and strategic partners • The enterprise’s success depends on the relationships among everyone involved • Some 70% of the final cost of goods and services is in their information content • In the extended enterprise each relationship will prosper only when it is a win-win relationship: • Ex. In return for maintaining a buyer’s parts inventory and providing just-in-time delivery, a supplier should be paid electronically upon delivery of goods.

26. 4. Linkage Analysis Planning cont. • 3. Plan your electronic channels: • Electronic link used to create, distribute, and present information and knowledge as part of a product or service or as a secondary good. • Organizations with the longest electronic reach into their extended enterprise will have the advantage.

27. Initial work on BSP began in the early 1970s. At first, it was for IBM internal use only; later it was made available to customers. • BSP is a method for analyzing, defining and designing an information architecture of organizations. • Designed to define an Information Architecture for the firm. The basic building blocks of the architecture are: • Data Classes: Categories of logically related data that are necessary to support the business • Business Processes: Groups of logically related decisions and activities required to manage the resources of the business 5. Business System Planning (Enterprise Modeling)

28. 5. Business System Planning cont. • Steps in the BSP process • Obtain authorization for the study and assemble the study team. • Define the data classes and the business processes. • Using these data classes and business processes, define the information architecture. • Compare this architecture with the present systems and identify missing and/or needed systems. • Establish priorities for each of the major systems contained in the architecture • Prepare the final study report and present it to top management • Initiate the construction of the architecture

29. Conclusion • Based on the successes and failures of past information systems planning efforts, we see two necessary ingredients to a good strategic planning effort: • IS plans must look towards the future– most likely in a sense-and-respond fashion • IS planning must be intrinsic to business planning

30. Conclusion cont. • IS plans typically use a combination of planning techniques presented • No single technique is best and no single one is the most widely used in business • Sense-and-respond is the new strategy-making mode • Creating an overall strategic envelope and conducting short experiments within that envelope, moving quickly to broaden an experiment that proves successful