Lecture Management information systems - Chater 11: Developing business/IT strategies

After completing this unit, you should be able to: Discuss the role of planning in the business use of information technology, using the scenario approach and planning for competitive advantage as examples; discuss the role of planning and business models in the development of business/IT strategies, architectures, and applications; identify several change management solutions for end user resistance to the implementation of new IT-based business strategies and applications.

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1 Discuss the role of planning in the

business use of information technology, using the scenario approach and

planning for competitive advantage as

examples

2 Discuss the role of planning and

business models in the development of business/IT strategies, architectures,

Learning Objectives

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Learning Objectives

3 Identify several change management

solutions for end user resistance to the implementation of new IT-based

business strategies and applications

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Why Study Planning Fundamentals?

• Information technology has created a

seismic shift in the way companies do

business Just knowing the importance

and structure of e-business is not enough You need to create and implement an

action plan that allows you to make the

transition from an old business design to

a new e-business design

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Case #1: ROI in Business/IT Planning

The Rowe Companies’ ROI Process

• Use simple ROI calculations to help

prioritize IT projects for planning purposes

• Also use economic value added (EVA)

analysis which takes into consideration

the cost of capital for a project, risk

factors associated with the project, and a targeted value return percentage

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The Rowe Companies’ ROI Process

• Return on opportunity (ROO) is also used because it combines more than a dozen

factors to assess the rate of change in the business environment, the rate of change

in business processes and IT

infrastructure, the competitive

environment, and the value of intangible

assets

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Merrill Lynch ROI Process:

• Risk-and-payback analysis required for

every costly technology initiative

• Single standard six-page template used

that poses yes-or-no questions to

evaluate project success factors coupled with a five-page financial report

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1 What are the benefits and limitations of

Rowe Companies’ ROI methods for IT project planning?

2 What is the business value of the ROI

methodology required for project

planning by Merrill Lynch?

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3 Do you agree with the IT investment

decision being made by the Rowe

Companies in response to changing

economic conditions? Why or why not?

4 How can a company identify, measure,

and compare the business/IT innovation

as well as the profitability of IT projects

in their planning process?

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IT as a Revenue-Producing Asset

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Organizational Planning Process

• Team building, modeling and consensus

• Evaluating what an organization has

accomplished and the resources they

have acquired

• Analyzing their business, economic,

political and societal environments

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• Anticipating and evaluating the impact of future developments

• Building a shared vision and deciding on what goals they want to achieve

• Deciding what actions to take to achieve their goals

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Operational Planning

Definition:

• Planning done on a short-term basis to

implement and control day-to-day

operations

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Scenario Approach

Definition:

• Teams of managers and other planners

participate in what management author

Peter Senge calls microworld, or virtual

world, exercises

• Microworld - simulation exercise that is a microcosm of the real world

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Trends Shaping Strategic Planning

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Why Plan for Competitive Advantage?

• Betting on new IT innovations can mean betting

the future of the company

• Leading-edge firms are sometimes said to be on

the “bleeding edge”

• Almost any business executive is aware of

disastrous projects that had to be written off,

often after large cost overruns, because the

promised new systems simply did not work.

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Strategic Opportunities Matrix

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What is SWOT Analysis?

• SWOT analysis is used to evaluate the impact

that each possible strategic opportunity can

have on a company and its use of information technology

• Strengths – core competencies

• Weaknesses – substandard business

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Business Model

Definition:

• A conceptual framework that expresses

the underlying economic logic and system that prove how a business can deliver

value to customers at an appropriate cost and make money

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Business Model Components

• Customer Value – Is the firm offering its customers

something distinctive or at a lower cost than its

competitors?

• Scope – To which customers is the firm offering this

value? What is the range of products/services offered that embody this value?

• Pricing – How does the firm price the value?

• Revenue Source – Where do the dollars come from? Who pays for what value and when? What are the

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• Connected Activities – What set of

activities does the firm have to perform to offer this value and when? How

connected are these activities?

• Implementation – What organizational

structure, systems, people, and

environment does the firm need to carry

out these activities? What is the fit

between them?

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• Capabilities – What are the firm’s capabilities

and capabilities gaps that need to be filled?

How does a firm fill these capabilities gaps? Is there something distinctive about these

capabilities that allows the firm to offer the value better than other firms and that makes them

difficult to imitate? What are the sources of

these capabilities?

• Sustainability – What is it about the firm that

makes it difficult for other firms to imitate it?

How does the firm keep making money? How

does the firm sustain its competitive advantage?

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Business/IT Planning Process

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Business/IT Planning Process Components

• Strategy Development – developing business

strategies that support a company’s business

vision

• Resource Management – developing strategic

plans for managing or out-sourcing a company’s

IT resources

• Technology Architecture – making strategic IT

choices that reflect an information technology

architecture designed to support a company’s

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What is IT Architecture?

• A conceptual design that includes:

• Technology Platform – networks, computer systems, system software and integrated enterprise application software

• Data Resources – databases

• Applications Architecture – business

applications

• IT Organization – organizational structure of the IS function and distribution of IS

specialists

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Strategic Positioning Matrix

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• Performance Improvement in Business

Effectiveness – widespread internal use

of Internet-based technologies to improve information sharing and collaboration

within the business and with trading

partners

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Business/IT Strategies

• Global Market Penetration – build

e-commerce websites with value-added

information services and extensive online customer support

• Product and Service Transformation –

use the Internet for electronic commerce transaction processing with customers at company websites, and e-commerce

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Business Application Planning

Definition:

• Includes the evaluation of proposals

made by the IT management of a

company for using information technology

to accomplish the strategic business

priorities developed earlier in the planning process

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Business Application Planning

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E-business Architecture Planning

Definition:

• Combines contemporary strategic

planning methods like SWOT analysis

and alternative planning scenarios with

more recent business modeling and

application development methodologies like component-based development

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E-business Architecture Planning

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Case #2: Global Application Integration

• “A great strategist can’t win a war unless

he keeps his lines of communication

clear.” George Patton

• One of the most persistent technological challenges of global business is getting

communications networks to expand in

lockstep with the demands of the myriad

of business applications

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1 What business benefits resulted from

the integration projects of Johnson

Controls and Bank of New York?

2 What challenges surfaced in each

project? Were they handled properly? Why or why not?

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3 What change management actions

could these companies have taken to

increase the acceptance of their IT

integration challenges? Explain

4 Is global application integration simply a

matter of providing enough bandwidth to meet the demand on the servers or is

there more to it? Provide some

examples of your position

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Definition:

• A process that carries out the plans for

changes in business/IT strategies and

applications that were developed in the planning process

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Scope and Level of Business Change

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Intranet Enterprise Portal Challenges

• Security

• Defining the scope and purpose of the portal

• Finding the time and money

• Ensuring consistent data quality

• Getting employees to use it

• Organizing the data

• Finding technical expertise

• Integrating the pieces

• Making it easy to use

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Enterprise Resource Planning Challenges

• Getting end user buy-in

• Scheduling/planning

• Integrating legacy systems/data

• Getting management buy-in

• Dealing with multiple/international sites and

partners

• Changing culture/mind-sets

• IT training

• Getting, keeping IT staff

• Moving to a new platform

• Performance/system upgrades

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End User Resistance Solutions

• Proper education and training

• End user involvement in organizational

changes, and in the development of new information systems

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Obstacles to Knowledge Mgmt Systems

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Dimensions of Change Management

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Change Management Tactics

planning and application development

often as possible, preferably in person

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Change Management Process

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Case #3: Business/IT Planning Strategies

Corning Inc.’s Strategy:

• We want IT people to be talking with the

business team about what we are doing

to increase the value of the business and focus on projects that either make positive change in the business or help take costs out or improve asset performance

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Benefit:

• This strategic thinking pays off in

budgeting meetings because you’re not

discussing the value of the project to the organization They have already

internalized why it’s important Projects are less likely to be cut in an economic

downturn

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Putting Business Processes First:

• Listen to what operational people are

saying

• Only then are opportunities defined

followed by business benefits

• Finally define mechanisms to determine whether goals were met

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1 Do you agree with how CIO Richard

Fishburn has defended Corning’s IT

department from an economic

downturn? Why or why not?

2 Why is aligning IT projects with business

objectives a good business/IT strategy

in challenging economic times? And in good times?

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3 Does Corning’s business/IT planning

process for its new supply chain system prove the value of aligning IT with

business goals? Why or why not?

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Case #4: Change Mgmt Challenges

Cincinnati Bell’s Convergence:

• The company reorganized itself by

starting with the needs of particular

groups of customers and then worked

backward to see what the company

should look like

• COO disbanded product and service units and established divisions serving

businesses and residential customers

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Challenges:

• Heads of business units were stripped of their

titles and dropped levels

• Customer service reps had to learn to handle

calls about any or all services and cross-sell

• Employees feared they would lose their jobs

• Computer systems had to be adapted to new

approach

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1 Was the reorganization of Cincinnati Bell as

revealed in this case a good business strategy? Why or why not?

2 Were the change management methods

revealed in this case adequate for the changes being made? Why or why not?

3 What further changes should be made in IT

systems to better support Cincinnati Bell’s business convergence? Defend your

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Summary

• Managing information technology requires

planning for changes in business goals,

processes, structures, and technologies

• Planning is a vital organization process that

uses methods like the scenario approach and

planning for competitive advantage to evaluate

an organization’s internal and external

environments; forecast new developments;

establish an organization’s vision, mission,

goals, and objectives; develop strategies,

tactics, and policies to implement its goals; and articulate plans for the organization to act upon.

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• A good planning process helps

organizations learn about themselves and promotes organizational change and

renewal

• Strategic business/IT planning involves

aligning investment in information

technology with a company’s business

vision and strategic goals such as

reengineering business processes or

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Summary

• Implementation activities include

managing the introduction and

implementation of changes in business

processes, organizational structures, job assignments, and work relationships

resulting from business/IT strategies and applications such as e-business

initiatives, reengineering projects, supply chain alliances, and the introduction of

new technologies

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