Chap 011

Chapter11 Developing Business/IT Strategies McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights Learning Objectives • 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 11-2 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 must create and implement an action plan that allows you to make the transition from an old business design to a new e-business design 11-3 Case 1: Forrester, NMSU, Exante Financial Services, and Others • The alignment between business and IT strategy is crucial to business success; sometimes it is IT that makes it happen. • For most CIOs, putting together an IT strategic plan which helps to improve the business-IT relationship is very important. • Businesses may not have a clear strategy or they may have some strategies, but they may not apply to all the business activities taking place. • IT can help the business articulate how IT fits into business and influence overall business strategy. 11-4 Case Study Questions 1. Consider statements made in the case about business often not having an overarching business strategy that can serve as guidance for the development of a strategy for IT. How is it possible that companies get by without some sort of stable and clear direction? What does this tell you about the business and industry environment in which they operate? 2. Dave Aron of Gartner notes that in some cases the lack of clear business strategy provides an opportunity for IT leaders to step in and help articulate it and the role IT will play in the new strategy. This sounds like a good thing for IT people. What is the downside of being in this situation? 3. Why do you think IT’s success is dependent on the overall business strategy of an organization? Why must they be tied together? Provide several reasons. 11-5 Components of Organizational Planning 11-6 . Planning • Strategic Planning – Deals with the development of an organization’s mission. schedules. goals. and policies – Begins with strategic visioning questions • Tactical Planning – The setting of objectives and the development of procedures. rules. and budgets • Operational Planning – Done on a short-term basis to implement and control day-to-day operations 11-7 . strategies. Strategic Visioning Questions 11-8 . The Scenario Approach • Gaining in popularity as a less formal. strategic planning methodology – Teams of managers and planners participate in microworld or virtual world exercises – Business scenarios are created and evaluated – Alternative scenarios are then created 11-9 . but more realistic. Trends that Affect Strategic Planning 11-10 . Planning for Competitive Advantage • Strategic business/IT planning – Involves evaluating the potential benefits and risks of using IT-based strategies and technologies for competitive advantage • The following models can help generate ideas for the strategic use of IT to support initiatives – Competitive forces – Competitive strategies – Value chain 11-11 . Strategic Opportunities Matrix 11-12 . SWOT Analysis • SWOT stands for – Strengths: a company’s core competencies and resources – Weaknesses: areas of substandard business performance compared to others – Opportunities: potential for new business markets or innovative breakthroughs that might expand current markets – Threats: anything that has the potential for business and market losses 11-13 . Business Models and Planning • Business model answers vital questions about the fundamental components of a business – Who are our customers? – What do our customers value? – How much will it cost to deliver that value? – How do we make money in this business? 11-14 . Questions for all Business Models Customer value Are we offering something distinctive or at a lower cost than our competitors? Scope To which customers is this value being offered? What range of products/services offered embody this value? Pricing How do we price the value? 11-15 . and what drives them? What drives value in each source? Connected activities What do we have to do to offer this value and when? How connected are these activities? 11-16 .Questions for all Business Models Revenue source Where do the dollars come from? Who pays for what value and when? What are the margins in each market. people. and environment do we need to carry out these activities? What is the fit between them? Sustainability What is it about the firm that makes it difficult for other to imitate it? How do we keep making money? How do we sustain our competitive advantage? 11-17 .Questions for all Business Models Implementation What structure. systems. Questions for all Business Models Capabilities What are our capabilities and capabilities gaps? How do we fill these gaps? Is there something distinctive about these capabilities that lets us offer the value better than other firms? Is this capability hard to imitate? What are the sources of these capabilities? 11-18 . Questions Specific to E-Business Models Customer Value What is it about Internet technologies that allows us to offer customers something distinctive? Can Internet technologies help us to solve a new set of problems for customers? Scope What is the scope of customers that Internet technologies enable us to reach? Does the Internet alter the product or service mix that embodies the firm’s products? 11-19 . Questions Specific to E-Business Models Pricing How does the Internet make pricing different? Revenue source Are revenue sources different with the Internet? What is new? Connected activities How many new activities must be performed as a result of the Internet? How much better can Internet technologies help us perform existing activities? 11-20 . structure. systems. people.Questions Specific to E-Business Models Implementation How do Internet technologies affect the strategy. and environment of the firm? Capabilities What new capabilities do we need? What is the impact of Internet technologies on existing capabilities? Sustainability Do Internet technologies make sustainability easier or more difficult? How can the firm take advantage of it? 11-21 . Business Models as Planning Tools • A business model forces rigorously and systematic thinking about the value and viability of business initiatives – The strategic planning process is then used to develop unique business strategies that capitalize on a business model – The goal is to gain a competitive advantage in an industry or marketplace 11-22 . The Business/IT Planning Process 11-23 . The Business/IT Planning Process • The business/IT planning process has three major components – Strategic development – Resource management – Technology architecture 11-24 . Information Technology Architecture • The IT architecture is a conceptual design that includes these major components – Technology platform – Data resources – Application architecture – IT organization 11-25 . Balanced Scorecard • The balanced scorecard measures a company’s activities in terms of vision and strategies • The system has four processes – Translating vision into operational goals – Communicating the vision and linking it to individual performance – Business planning – Feedback/learning and strategy adjustment 11-26 . such as time to process phone calls – Business process: reflects the performance of key business processes. such as how many hours are spent training staff 11-27 . such as cash flow or ROI – Customer: measures having a direct impact on customers. such as time spent prospecting or process costs – Learning/growth: the company’s learning curve.Balanced Scorecard • The business perspectives a scorecard measures – Financial: reflects financial performance. Identifying Business/IT Strategies • The most valuable Internet applications allow companies to – Transcend communication barriers – Establish connections that enhance productivity – Stimulate innovative development – Improve customer relations 11-28 . Strategic Positioning Matrix 11-29 . such as intranets and extranets 11-30 . chat systems. discussion groups.Strategic Matrix • Cost and Efficiency Improvements – Use the Internet as a fast. low-cost way to communicate and interact with others – Use of e-mail. and company websites • Performance Improvement in Effectiveness – Major improvements in business effectiveness recommended – Increase use of Internet-based technologies. Strategic Strategies • Global Market Penetration – Capitalize on a high degree of customer and competitor connectivity and use of IT – Use e-commerce websites with value-added information services and extensive online customer support • Product and Service Transformation • Develop and deploy new Internet-based products and services that strategically reposition it in the marketplace 11-31 . make sales. and fulfill orders • Transaction Intermediary: Use the Internet to process purchases 11-32 .E-Business Strategy Examples • Market Creator: be among the first to market and remain ahead of the competition by continuously innovating • Channel Reconfiguration: use the Internet as a new channel to directly access customers. E-Business Strategy Examples • Infomediary: use the Internet to reduce the search cost. offer a unified process for collecting the information needed to make a large purchase • Self-Service Innovator: provide a comprehensive suite of services that the customer’s employees can use directly • Supply Chain Innovator: use the Internet to streamline supply chain interactions • Channel Mastery: use the Internet as a sales and service channel 11-33 . Business Application Planning Process 11-34 . Comparing Planning Approaches 11-35 . E-Business Architecture Planning 11-36 . Implementation • Many companies plan changes very well – Few manage to convert a plan into action – This is true even if senior management consistently identifies e-business as an area of great opportunity 11-37 . Case 2: Blue Cross and Blue Shield and Others • • • • Implementing changes needed by new information systems in an organization is very challenging as employees resist change . One of the biggest mistakes managers make is assuming that everyone is motivated by ambition. One way to manage change is through education and training. Employees accept change if they are provided proper education and training on the new system that is being implemented. Many people are motivated as much or more by the work they do as they are by the opportunity to move up in the hierarchy. Understanding the science behind change and resistance to change can lead to more effective approaches to foster involvement and smooth out transitions to new systems. 11-38 . as discussed in the case. Although a very detailed change proposal may prevent people from making their own connections. 11-39 . What ways other than those discussed in the case would you use to entice people to embrace proposed changes? Provide several suggestions and justify their rationale.Case Study Questions 1. What would you have suggested that he should do before you read the case? What about afterwards? How did your recommendations change as a result? 3. How do you balance these two concerns? What guidelines would you use to ensure that you are not veering too far off in either direction? 2. it may lead others to consider the proposal to be vague and unfinished. Organizational change goes beyond promotions and the threat of layoffs. Kevin Sparks of Blue Cross and Blue Shield of Kansas City had a difficult time convincing his people of the need for change. Implementing Information Technology • Many businesses have undergone multiple major reorganization since the early 1980s – – – – – – – – Business process reengineering Installation and upgrades of an ERP system Upgrading legacy systems to be Y2K compliant Creating shared service centers Just-in-time manufacturing Sales force automation Contract manufacturing The introduction of euro currency • E-business is the latest organizational change 11-40 . Impact and Scope of Implementing IT 11-41 . security.Intranet Enterprise Portal Challenges – – – – – – – – – – Security. security Defining the scope and purpose of the portal Finding the time and the money Ensuring consistent data quality Getting employees to use it Organizing the data Finding technical expertise Integrating the pieces Making it easy to use Providing all users with access 11-42 . Enterprise Resource Planning Challenges – – – – – – – – – – Getting end user buy-in Scheduling/planning Integrating legacy systems/data Getting management buy-in Multiple/international sites and partners Changing culture and mind-sets IT training Getting. keeping IT staff Moving to a new platform Performance/system upgrades 11-43 . using CRM systems 11-44 .End User Resistance and Involvement • Any way of doing things generates some resistance from the people affected • CRM projects have a history of failure – Up to 75 percent of CRM projects fail to meet their objectives – This is often due to sales force automation problems and unaddressed cultural issues – Sales staffs are often resistant to. or fearful of. no matter how technically elegant or efficient 11-45 .Keys to Solving End User Resistance • Keys to solving end user resistance problems – Education and training – End-user involvement in organizational changes and system development – Requiring involvement and commitment of top management and all stakeholders • Systems that inconvenience or frustrate users cannot be effective. Obstacles to KM Systems 11-46 . Change Management People factors have the highest level of difficulty and the longest time to resolve of any dimension of change management 11-47 . Key Dimensions of Change Management 11-48 . Change Management • Implementing a new e-business application may involve – Developing an action plan – Assigning managers as change sponsors – Developing employee change teams – Encouraging open communications and feedback about organizational changes 11-49 . not around it 11-50 . in person – Make liberal use of financial incentives and recognition – Work within the company culture. as often as possible.Change Management • Key tactics recommended by change experts – Involve as many people as possible in e-business planning and application development – Make constant change an expected part of the culture – Tell everyone as much as possible about everything. A Change Management Process 11-51 . Avnet Marshall’s Transformation 11-52 . UPS. Eli Lilly. headquarters. and Raytheon • 7-Eleven blends its IT investments with a range of assertive IT practices and capabilities – Counselor visits to stores twice a week – Delivers of stock three times a day – A transparent information infrastructure that links 70. Mohegan Sun. Vanguard. Carlson Companies. and supplier sites 11-53 .000 computers at stores.Case 3: 7-Eleven Japan. Case 3: 7-Eleven Japan. UPS. reporting. Mohegan Sun. Vanguard. and Raytheon • MIT identified four broad classifications of IT investments that can be managed as a portfolio to minimize business risk and optimize return – Transactional: used to cut costs or increase throughput for the same cost – Informational: provide information for accounting. communication. or analysis 11-54 . compliance. Eli Lilly. Carlson Companies. Carlson Companies. Eli Lilly.Case 3: 7-Eleven Japan. Vanguard. Mohegan Sun. or business products – Infrastructure: typically aimed at providing a flexible base for future business initiatives or reducing longterm IT costs via consolidation 11-55 . services. UPS. and Raytheon – Strategic: used to gain competitive advantage by supporting entry into new markets or by helping to develop new products. and Raytheon. What differences in investment approaches and strategies do you find? Which approach do you prefer? Why? 11-56 . 2. Carlson Companies. What is the portfolio management approach to IT planning? Use the four classifications of IT investments and examples of companies in this case to illustrate your answer. What are the keys to 7-Eleven Japan’s great success compared to other retailers in Japan? How does IT support such success? How could 7-Eleven Japan do even better? What role would IT play? Defend your proposal. Compare the IT portfolio investment approaches of Eli Lilly. 3.Case Study Questions 1. Knowledge management requires much more than technology.Case 4: Infosys Technologies • • • • Infosys has a long history of trying to leverage knowledge created by its employees for corporate advantage. The incentive system they created to encourage employees to contribute their knowledge created more problem than the management anticipated. Eventually Infosys had to change their incentive system. 11-57 . 2. Do you think these will succeed? Why or why not? 11-58 .Case Study Questions 1. What steps did the KM group at Infosys take to improve participation in the KM system? Why were some of these initiatives counterproductive? The KM group responded with corrective initiatives. Why do you think the knowledge management system at Infosys faced such serious implementation challenges? Defend your answer with examples from the case. Case Study Questions 3. What change management initiatives should the KM group have initiated at Infosys before attempting to develop and implement knowledge management at the company? Defend your proposals. 11-59 . paying particular attention to the final quote in the case by a long-time KM manager at Infosys.