INTRODUCTION
WHY PLANNING IS SO DIFFICULT?
Business Goals and System Plans Need to Align Technologies Are Rapidly Changing
Companies Need Portfolios Rather Than Projects Infrastructure Development Is Difficult to Find Responsibility Needs to Be Joint
Other Planning Issues
THE CHANGING WORLD OF PLANNING Traditional Strategy Making
Today’s Sense-and-Respond Approach to IT Planning Case Example: Microsoft
Case Example: Skandia Future Centers Case Example: Shell Oil
EIGHT PLANNING TECHNIQUES Stages of Growth
Critical Success Factors Competitive Forces Model
Framework Example: Five Forces Analysis of the Internet Beyond Porter—Downes’ Three Emerging Forces Value Chain Analysis
Case Example: An Automobile Manufacturer E-Business Value Matrix
Case Example: Cisco Systems Linkage Analysis Planning
Case Example: Electric Power Research Institute Scenario Planning
Case Example: Scenarios on the Future of IS Management CONCLUSION
QUESTIONS AND EXERCISES REFERENCES
FIGURE 1 Three Types of Planning
WHY PLANNING IS SO DIFFICULT?
Planning is usually defined in three forms—strategic, tactical, and operational—which correspond to three planning horizons. Figure 1 summarizes these three planning types and some of their characteristics. This chapter emphasizes strategic planning—the top row. Strategic is defined as “having a significant, long-term impact on the growth rate, industry, and revenue” of an organization. Strategic systems planning deals with
TARGETHORIZON FOCUS ISSUES
PRIMARY
RESPONSIBILITY
3–5 years Strategic Strategic planning, business process reengineering
Senior management CIO
1–2 years Tactical Resource allocation, project selection
Middle managers IS line partners Steering committee
6 months–1 year Operational Project management, meeting time, and budget targets
IS professionals Line managers Partners
INTRODUCTION
IS management is becoming both more challenging and more critical, especially in strategic systems planning. On the one hand, the technology is changing so fast that it is tempting to say, “Why bother?” On the other hand, most organizations’ survival depends on IT, so planning its effective use is a matter of organizational life and death.
How can this apparent paradox be resolved? The good news is that a variety of approaches and tools have been developed to assist in systems planning. The bad news is that there is no universal solution. Thus, most organizations use more than one approach or tool to empirically uncover which approach that would best fit its organi- zational context or culture.
It is important to establish the appropriate mind-set for planning. Although some managers believe planning means determining what decisions to make in the future, this view is untenable today because the business environment is so turbulent, making the future unpredictable. A practical view is that planning is
developing a view of the future that guides decision making today.
This seemingly subtle difference significantly changes how managers approach and execute planning. In turbulent times, some executives think in terms of strategy making rather than planning. Our definition of strategy is
stating the direction we want to go and how we intend to get there.
The result of strategy making is a plan.
This chapter first describes the traditional view of planning, and then offers a cur- rent version of strategic systems planning, that is, strategy making, which is intended to synchronize with today’s faster-paced business world. Finally, some approaches that are used in strategic systems planning are presented.
planning deals with planning for the use of IT for strategic purposes. It attempts to form a view of the future to help determine what should be done now.
Some fundamental reasons explain why systems planning is so difficult. Here are a few of them.
Business Goals and Systems Plans Need to Align
Strategic systems plans need to align with business goals and support them.
Unfortunately, if top management believes the firm’s business goals are extremely sen- sitive, the CIO is often excluded in major strategic meetings by top management. The IS department can be left out of the inner circle that develops these plans. Fortunately, more and more CIOs are being made part of senior management. In addition, systems planning is becoming a shared responsibility among the CIO, CTO, and other members of senior management. The emergence of e-commerce and globalization caused CEOs and CFOs to realize they need to be involved in systems planning.
Technologies Are Rapidly Changing
How can executives plan when IT is changing so rapidly? One answer is continuous monitoring and planning the changes of technologies and how the industry would adopt this technology. Gone are the days of an annual planning cycle done the last few months of the year and then put aside until the following year. Rather, the planning process first needs to form a best-available vision of the future on which to base current decisions.
Then the technology needs to be monitored to see whether that future vision needs alteration. When it does, adjustments in current decisions are made. Some organizations have an advanced technology group charged with watching and evaluating new tech- nologies. It is important for organizations to pay particular attention to the impact of disruptive technologies or disruptive innovation. Sometimes, an emerging and inexpen- sive technology emerges and swiftly displaces incumbent technologies. A classic exam- ple is the Linux Operating System (OS). When it was introduced, its capability was infe- rior to other existing OSs like Unix and Windows NT. Linux was inexpensive, and thanks to continuous improvements, it has earned a significant market share for com- puter servers. In 2007, IBM announced it would use Linux with its new servers. The USB memory stick is another instance of disruptive technologies. This inexpensive storage medium has changed the way people share files, displacing disk storage. Many forecast- ers have predicted that Voice-over-IP will replace decades-old land-based telephony.
The planning issue here is for management to foresee the upcoming of innovation with superior technology potential and viable business applications. These new tech- nologies can be a cost-effective addition to the existing technological infrastructure.
Or, they can be a potential replacement that needs a carefully migration strategy.
Companies Need Portfolios Rather Than Projects
Another planning issue is the shift in emphasis from project selection to portfolio development. Businesses need a set of integrated and seamless technologies that work together. Project developments have had a history of building “stove-pipe” systems that result in applications that are not compatible with each other. A portfolio approach requires a more sophisticated form of planning because projects must be evaluated on more than their individual merits. How they fit with other projects and how they balance the portfolio of projects become important. The Internet Value Matrix described later is an example of this approach.
Infrastructure Development Is Difficult to Fund
People understand intuitively that developing an infrastructure is crucial. However, it is extremely difficult to determine how much funding is needed to develop or improve infrastructure. Often, such funding must be done under the auspices of large applica- tion projects. The challenge then is to develop improved applications over time so that the infrastructure improves over time.
Since the mid-1980s, companies have faced a continual succession of large infra- structure investments. First, they needed to convert from a mainframe to a client- server architecture to share corporate and desktop computing. Then they implemented ERP to centralize and standardize data so that everyone had the same information.
Then they needed to create a Web presence and give users access to back-end systems.
Now they are under pressure to implement Web Services–oriented architectures to work inter-company and draw on best-of-breed processes. Boards of directors have realized that they have to fund these huge multiyear projects just to remain competitive.
Making these large-stakes bets increases the difficulty of systems planning.
Responsibilities Needs to Be Joint
It used to be easier to do something yourself than gather a coalition to do it. This is no longer the case. Systems planning initiated by and driven by the CIO has not proven as effective as systems planning done by a full partnership among C-level officers (CEO, CFO, CIO, COO) and other top executives. Systems planning has become business planning; it is no longer just a technology issue. Many large organizations set up an Information Systems Council (ISC) or committee to periodically review the effective- ness of the current strategic plan, assess the current technological environment, and develop an IT strategy based on the institution’s mission and goals.
Other Planning Issues
Several other characteristics of planning make strategic systems planning difficult.
There is always tension between top-down and bottom-up approaches, thus the plan- ning process must strike a balance between radical change and continuous improve- ment. Furthermore, systems planning does not exist in a vacuum. Most organizations have a planning culture into which systems planning must fit. This sampling of issues illustrates why systems planning is a difficult but crucial task.
THE CHANGING WORLD OF PLANNING
This section discusses how strategic planning has evolved along with the rapid change of Internet-driven technologies.
Traditional Strategy Making
In its Tactical Strategies1areport, Gartner EXP states that traditional strategy making followed the progression shown in Figure 2:
1.Business executives created a strategic business plan that described where the business wanted to go.
2.From that plan, IS executives created an IS strategic plan to describe how IT would support that business plan.
Step 1 Where is the business going and why?
Step 2 What is required?
Step 3 How can it be delivered?
Business strategy
• Business decisions
• Objectives and direction
• Change management
Systems strategy
• Business-based
• Demand-oriented
• Application-focused
IT strategy
• Activity-based
• Supply-oriented
• Technology-focused
IT impact and potential
Direction for IS Supports
business
Needs and priorities Infrastructure
and services
FIGURE 2 Traditional Strategy Making
Source:Adapted from and reprinted with permission from Roger Woolfe, Barbara McNurlin, and Phil Taylor,Tactical Strategy, Wentworth Research Program (now part of Gartner EXP, 56 Top Gallant, Stamford, CT 06904), November 1999.
3.An IT implementation plan was created to describe exactly how the IS strategic plan would be implemented.
Companies felt comfortable spending quite a bit of time, often a full year, creating a single strategic plan that they would implement over, say, the coming five years. That plan was created by top management. If the CIO was part of that group, then IS was involved in the planning; otherwise, IT considerations may or may not have been taken into account.
From the corporate strategy, IS staff developed the systems strategy, which described what was required to support the business plan. Finally, from that systems strategy, IS staff developed the technology-based IT strategy, which described how the company could deliver the needed capabilities.
This traditional planning stance was based on the following assumptions:
• The future can be predicted.
• Time is available to progress through this three-part sequence.
• IS supports and follows the business.
• Top management knows best, because they have the broadest view of the firm.
• The company can be viewed as an army: Leaders issue the orders and the troops follow.
Today, due to the Internet, these assumptions no longer hold true.
The Future Is Less Predictable
The Internet has caused discontinuous change, that is, change that can occur in unex- pected ways. Industry leaders may not be able to use the same strategies they used in the past to maintain their superior market position. Unexpected and powerful com- petitors can emerge out of nowhere. For example, in the mid-1990s, how many book- sellers predicted Amazon.com’s business model of selling only on the Web or the suc- cess it would have? Not very many. Likewise, how many top executives seriously considered eBay’s online auction model as one that could transform the way they would buy and sell? Not very many. As firms incorporate the Internet into their busi- ness, even newer Internet-based business models will appear. Industry after industry is encountering discontinuous changes to the way they have traditionally operated.
Time Is Running Out
Due to the Internet, time is of the essence. Companies no longer have the luxury of taking a year to plan and several years to implement. Worse yet, the most time- consuming phase of the sequence—IT implementation—is at the end, which means the IS department is late in supporting the business’ strategic plan from the outset. To move quickly, IT implementation planning actually needs to be ahead of business strategizing. Furthermore, it needs to be faster than it has been in the past.
IS Does Not Just Support the Business Anymore
IT has become the platform of business; it makes e-business possible. Marilyn Parker, Bob Benson, and Ed Trainor2have pointed out that IT can serve lines of business in two ways. As shown in Figure 8, one is by supporting current or planned operations, which they call “alignment.” The second is by using systems to influence future ways of working, which they call “impact.” To fulfill this second role, IS needs to get ahead of the business to demonstrate IT-based possibilities. At the very least, IS and the business need to strategize together, not follow the old model of business first, IS second.
Top Management May Not Know Best
When change occurs rapidly and when top management is distant from the front lines of the business (i.e., those interacting with customers, partners, and suppliers), having strategy formulated by top management limits it to what these few members of the firm can distill. Today’s trend of customizing products and services to smaller and smaller niche markets, even to markets of one, requires diversity in strategy making. It may be best performed by those closest to customers—if not customers themselves—because they know their local environment. Hence, the former inside- out approach to strategy making needs to be shifted to be outside-in, as illustrated in Figure 3.
An Organization Is Not Like an Army
Industrial-era planning implicitly viewed companies as an army: Top management edicts rippled down through the organization to be implemented by the troops on the front line who dealt with customers. This metaphor is not holding true. Take, for exam- ple, the business process reengineering failures of the early 1990s. Executives learned
that their mandates to institute major changes in business processes, imposed from the top, often ended in disaster. Not only did the projects fail, but they ate up resources, burned out employees, created animosity, and even destroyed valuable company knowledge assets because experienced employees left.
A socio-biological view of information systems is to see systems as living entities that evolve, with self-interest, capable of mutation. They are not commanded; they can only be nurtured or tended. Means should be given to these entities so that they can improve themselves and their world. This new paradigm, if believed, obviously requires a different form of leadership, one that cultivates a context for knowledge to lead to innovations. Many futurists see the sense-and-respond approach as the “next big thing” to community-wide quality improvement.
Today’s Sense-and-Respond Approach to IT Planning
If yesterday’s assumptions no longer hold true, thus making yesterday’s approach to strategy making less effective, what is appearing to take its place? The answer is a kind of sense-and-respond strategy making, as reported in Gartner EXP’s Tactical Strategy Report.1a
Let Strategies Unfold Rather Than Plan Them
In the past, top management took the time to articulate one enterprise-wide strategy.
In times of rapid change and uncertainty about the future, such as we are now experi- encing, this approach is risky. If a bet proves wrong, it could be disastrous.
When predictions are risky, the way to move into the future is step by step, using a sense-and-respond approach. It means sensing a new opportunity or possibility and quickly responding by testing it via an experiment. The result is a myriad of small experiments going on in parallel, each testing its own hypothesis of the future, as illus- trated in Figure 4.
A company that illustrates this sense-and-respond approach to developing strat- egy in the Internet space is Microsoft, say Shona Brown and Kathy Eisenhardt in their book,Competing on the Edge: Strategy as Structured Chaos.3
Customers Back office
Suppliersand partn Back office ers
Front line Core
FIGURE 3 Outside-In Strategy Development Source:Adapted from and reprinted with permission from Roger Woolfe, Barbara McNurlin, and Phil Taylor,Tactical Strategy, Wentworth Research Program (now part of Gartner EXP, 56 Top Gallant, Stamford, CT 06904), November 1999.
CASE EXAMPLE