Lecture Business management information system - Lecture 10: Planning the sense-and-respond approach of strategy-making

Lecture Business management information system - Lecture 10: Planning the sense-and-respond approach of strategy-making. In this chapter, the following content will be discussed: The traditional view of planning with the sense-and-respond approach of strategy-making, presenting seven IS planning techniques, seven planning techniques, skandia future centers, shell oil.

The

sense-and-respond approach of strategy-making

Lecture 10

Today lecture

n The traditional view of planning with the

sense-and-respond approach of strategy-making, presenting seven

IS planning techniques

n Case examples include

¨ Skandia Future Centers

¨ Shell Oil,

SKANDIA FUTURE CENTERS Case example: Formulate Strategy

Closest to the Action

n Skandia Future Centers (SFC), located in Stockholm, Sweden, is an incubator for testing ideas on IT, social relationships, and networking for the Skandia Group, the 150-year old giant Swedish financial services company

n The center acts as an inspirer and advisor to those who

do the strategy making within Skandia

SKANDIA FUTURE CENTERS Case example: Formulate Strategy

Closest to the Action

n The center was created in 1996 by Leif Edvinsson to

give Skandia a laboratory to break out of its current ways

of thinking and to provide a place where different

generations can collaborate on on-the-edge projects

n The mission is to explore five key driving forces of the

business environment:

SKANDIA FUTURE CENTERS Case example: Formulate Strategy

Closest to the Action

n The European insurance market, demographics,

technology the world economy, and organization and leadership

n goal is to devise a vision of the company’s future

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action 3-Generation Teams:

n One of the first concepts used at the center was 3G

teams, getting three generations (25+, 35+, 45+) to work together

n The teams were part-time and cross-cultural; coming

from Venezuela, Germany, Sweden, and the United

States

n The participants were chosen by peers as well as

nominated from different parts of the company

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action

n “When you ask for answers, you get a debate When you focus on questions, you get a dialog,” says Edvinsson

n Based on their questions, participants arrived at a

number of interesting contexts for the questions, such as the evolution of the financial community around the world and the evolution of IT

n These contexts were presented to 150 Skandia senior executives, not through a report, but through scenarios

of these five future environments performed by

professional actors in a theater play

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

n At the café, the 150 gathered for one hour around

stand-up tables at different Skandia sites

n Each table had coffee and a laptop loaded with

groupware software from Ventana Software

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action

n The entire project was videotaped and sent to a larger community, along with the questions and a video of the play and the café

n The goal of this project was to show the power of

collective intelligence

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action

n The knowledge café accelerated innovation at Skandia, transforming it into an innovation company

n The effect has been demonstrated by Skandia’s growth,

to become a global innovative financial service company

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action

Nurturing the Project Portfolio:

n Edvinsson thinks of the center as a garden, where some

of the projects are growing and some are not

n He tends them by looking at the level of interest

surrounding each one and at the progress each has

made, which he equates with gardening

SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the

Action

n Ten years after the creation of the center, the head of the FSC was appointed as Chair Professor of Intellectual

Capital at the University of Lund, Sweden

n Looking at the future, Edvinsson reckons that the

success of the firm of the future lies in its ability to create intangible value creation, through intense exchange of knowledge at the global scale

Today’s Sense-and-Response Approach

cont.

If yesterday’s assumptions no longer hold true, what is

taking the ‘old’ approach’s place? cont.:

n 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

Today’s Sense-and-Response Approach

cont.

¨ Top management set the parameters for the experiments (= a

‘strategic envelope’), and then continually manage that context

¨ Need to meet often to discuss:

n Shifts in the marketplace

n How well each of the experiments is proceeding

n Gaining ‘followership’ or showing waning interest?

Today’s Sense-and-Response Approach

cont.

n A strategic conversation is a regular, frequent meeting at which executives share the workload of monitoring the business environment and responding to it

n Perhaps the vice president of operations might be

charged with reporting on “today,” such as the size of the company’s mobile workforce

Today’s Sense-and-Response Approach

Today’s Sense-and-Response Approach

cont.

n The purposes of each meeting are to stay in tempo with the marketplace (which may mean setting new priorities), spot trends in their infancy, launch new projects, add

resources to promising ones, cut funding for others, and

so forth

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n Steve Miller, then incoming general manager of oil

products at Royal Dutch/Shell Group, believed change would only occur if he went directly to his front lines—employees at Shell gas stations around the world

n He felt he had to reach around the middle of the

company to tap the ingenuity of frontline employees at the gas stations, encouraging them to devise strategies that were best for their local markets

SHELL OIL Web Portal

Now utilizing Social Media

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n He set aside 50 percent of his own time for this work and required his direct reports to do the same

n His goal was not to drive strategy from corporate, as had been tried and failed, but to interact directly with the

grass roots and support their new initiatives, thus

overwhelming the old order in the middle of the

company

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

Action Labs:

¨ His technique was to use action labs.

¨ He invited six teams, each with six to eight people from gas stations in one country, to a week-long

“retailing boot camp” at which they learned how to identify local opportunities and capitalize on them

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n The teams were then sent home for 60 days, each to develop a proposal of how to double their net income or triple their market share

n six teams came to headquarters:

n After 60 days, the first six teams returned for a “peer challenge” at which they critiqued each others plans

n They then returned home for another 60 days to hone their plans for the third action lab: approval or disapproval.

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n At this third lab, each team took turns sitting in “the hot seat” facing Miller and his direct reports, who grilled them for three hours on their plan

n The teams, in turn, described what they needed from Miller as the other teams watched

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n The plans were approved, denied, or modified

n If funded, the promised results were factored into

an operating company’s goals

n The teams then had 60 days to implement their plans, after which they would return for a fourth session with Miller and his reports

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

The Results:

q These action labs had a powerful effect

q They caused stress on Shell’s way of doing business, in effect, unfreezing the status quo

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n The corporate middle, which had not formerly seen good results from corporate efforts, saw solid plans and

energized subordinates

n In turn, they became energized

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

q In addition, the labs led to much more informal

communications up, down, and across Shell

q The teams, for instance, felt comfortable calling up Miller and his staff—a significant departure from the past

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

Miller and his staff made decisions:

q These executives had to make on-the-spot decisions in front of the frontline teams rather than behind closed doors

q They found they had to be consistent and straight with the teams

q It was a difficult and trying experience for all, but

humanizing for the teams

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

q The result: a 15 percent increase in business

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n Miller learned that small local projects can have large effects

n The focus was to tap the intelligence at the front lines, with controls and rewards supporting that goal

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n “We’re not going to tell you what to do Pick a big-ticket business challenge you don’t know how to solve.Let’s see if we can do things a little differently,” told Miller to teams from Malaysia, Chile, Brazil, South Africa, Austria, France and Norway

SHELL OIL Case example: Guide Strategy-Making

with a ‘Strategic Envelope’

n Top management had the illusion of being in control via their directives

n Through the action labs, they learned as their staff

learned, they received much more feedback, and they knew far more about their customers and the

marketplace

n Guidance and nurturing came from the top, so there was not complete chaos

Today’s Sense-and-Response Approach

n However, to have a rightful place in the strategizing

process, the IS function needs to be strategy oriented

Today’s Sense-and-Response Approach

cont.

n Many have been tactical and operational, reacting to

strategies formulated by the business

n To become strategy oriented, CIOs must first make their departments credible, and second, outsource most

operational work to release remaining staff to help their business partners strategize and experiment

Today’s Sense-and-Response Approach

cont.

Test the Future:

q To get a running start, as well as contribute ideas about the future, IS departments need to test potential futures before the business is ready for them

q One mechanism for testing the future is to provide

funding for experiments

q Another is to work with research organizations

q Yet another is to have an emerging technologies group

Today’s Sense-and-Response Approach

cont.

The Infrastructure in Place:

q Internet commerce requires having the right IT

infrastructure in place

q Hence, the most critical IT decisions are infrastructure decisions

Today’s Sense-and-Response Approach

cont.

q Roger Woolfe and his colleagues recommend that IT

experiments include those that test painful infrastructure issues, such as how to create and maintain common, consistent data definitions;

q How to create and instill mobile commerce standards

among handheld devices; how to implement

e-commerce security and privacy measures; and how to determine operational platforms, such as ERP and SCM

Seven Planning Techniques

q Due to the importance and the difficulty of systems

planning, it is valuable to use a framework or

methodology

q A number of techniques have been proposed to help

IS executives do a better job of planning

Seven Planning Techniques

n The seven presented here take different views of IS planning, including

n IT in organizations, defining information needs,

understanding

¨ The competitive market,

¨ categorizing applications into a portfolio,

¨ mapping relationships, and surmising about the future

Seven Planning Techniques

1. Stages of Growth

2. Critical Success Factors

3. Competitive Forces Model

7. Value Chain Analysis

Seven Planning Techniques

4. E-business Value Matrix

5. Linkage Analysis Planning

6. Scenario Planning

Stages of Growth

n Richard Nolan and Chuck Gibson observed that many organizations go through four stages in the introduction and assimilation of a new technology

n Stage 1: Early Successes.

The first stage is the beginning use of a new

technology Although stumbling occurs, early successes lead to increased interest and experimentation

Stages of Growth conti

n Stage 2: Contagion.

¨ Based on the early successes, interest grows rapidly as new products and/or services based on the technology come to the marketplace.

q They are tried out in a variety of applications; growth is

uncontrolled and therefore rises rapidly.

q This proliferation stage is the learning period for the field, both for uses and for new products and services.

approaches generates waste.

q The integration of systems is attempted but proves difficult, and suppliers begin efforts toward

standardization

Stages of Growth conti

¨ An organization can be in several stages simultaneously for different technologies.

Stages of Growth …

n Example (Figure 4-5):

¨ DP Era 1960 – early ’80s

¨ Micro era early ’80s – late ’90s

¨ Network era late’90s – 2010?

1 Stages of Growth cont.

n The eras overlap each other slightly at points of

“technology discontinuity”

¨ Proponents of the proven old dominant design struggle with proponents of the new and unproven designs

n ‘Inevitably’ the new (proven) win out

n 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

Stages of Growth

n Management principles differ from stage to stage

n Different technologies are in different

stages at any point in time

continues to be an important aid to the systems planning process.

summary

n Case examples include

¨ Skandia Future Centers

¨ Shell Oil