1 is6600 – 8 information, knowledge and strategy “we don’t do it projects at jetblue. we do...
TRANSCRIPT
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IS6600 – 8
Information, Knowledge
and Strategy
“We don’t do IT projects at JetBlue. We do Business Projects” – CIO Joseph Eng
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Learning Objectives
• What is the role of the CIO? CKO?• How can IS be strategised?• The value of alignment.• From alignment to agility and
accountability• The Balanced Scorecard – a strategic tool
for action in organisations
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Story One
• The CEO of an insurance company wonders why a key competitor seems so much more innovative and responsive to customer needs. “How do they manage to initiate, customize, and support such a variety of insurance products so quickly?” she asks. “We could not cope with the complex information processing that must be required! What are they doing differently with their people and technology? Our systems personnel are always bogged down with last year’s priorities…”
Chan, MISQE, 1, 2, 97-112.
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Analysis
• The competitor:– has developed core competence in the application of IS
to business needs.– has developed the ability to respond to business
conditions effectively (business intelligence + KM)– has employees who
• can apply relevant knowledge efficiently & effectively.• are focused on today’s tasks
– has identified information as a critical resource– ensures that the IS fits and supports the business– has, in consequence, a better Business-IS alignment
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Story Two
• A CIO wonders when he will be accepted at top management meetings. Although he has won a long, hard battle to be present at these meetings, to understand new business directions better, he senses that his presence is merely tolerated. His ideas have little clout. His colleagues acknowledge that IT is becoming increasingly important to business operations, but their thinking and behavior stifle innovation.
Chan, MISQE, 2, 1, 97-112.
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Analysis
• The organisation itself barely recognises the importance of information
• The CIO is marginalised – perhaps useful as someone important for
operational support, but not strategic planning.• The organisation is probably failing to align
its overall business direction with its IS policies, skills, capabilities
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Story Three
• The CEO of a luxury goods retailer asks you, the CKO, to propose a new KMS that will will ‘grab’ knowledge from global buyers about fashion trends to inform retail sales staff who can then answer customer queries better.
• The sales staff are not interested in using such a boring and un-interactive KMS.
• How will you react to the CEO?
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Story Four
• The CEO says to his board “we need a new kind of CIO; someone who understands our whole business, someone whose career is *not* over [laughter], someone who can help drive this company in these turbulent times. Do people like this exist?”.
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Analysis
• What do you think?– Do these people exist?– What kind of background would a person like this
have?– What changes have occurred in the firm – changes
that inspire a CEO to talk like this?
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CISCO’s CIO
• IT budget of US$1billion/year• The CIO returns 50% to the business functions
– “Its really your money. Tell me how to spend it in a way that helps you”
– But system integration and compatibility are important• Procurement process control• Business unit managers own their own projects• The CIO is the service provider but not the project owner• Users get more value from IT when they are responsible for it• Maturity of both IT and users is critical to develop trust
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Questions to Ask about Organisational IS & KM
• Does IS or KM drive an organisation’s competitiveness?
• What role does IS/KM play in corporate strategy?– Mission critical, integral?– Peripheral, supporting?
• Now? Five years later?
• Are significant resources devoted to IS/KM, or just a few $$ here and there?
• Are IS/KM people deeply engaged in many aspects of the business?
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The Consequences of Poor Business-IS Alignment?
• IT Competencies are not developed, promoted or managed.
• IT and Business risks are poorly assessed (if at all).• Business executives cannot clearly articulate their IS
needs and don’t really understand what IS is for.• IS people have limited business vision or knowledge.• IS investments are expensive and yield low returns.• Good ideas are not developed
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Then What is (IS) Alignment?
• “the degree to which the IT mission, objectives and plans support and are supported by the business mission, objectives and plans”
» [Reich & Benbasat, MISQ, 24, 1, p.82]
• “fit” & “integration” among business strategy, IT strategy, business infrastructure, and IT infrastructure.
» [Henderson & Venkatraman, IBMSJ, 32, 1, 4-16]
• Effective IS management requires a both a balance and effective alignment across four domains.
• Note: Its co-alignment, not one-way alignment
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Henderson & Venkatraman’s Strategic Alignment Model
Strategy Alignment Process(Linkage & Automation)
IS/ITInfrastructure
and Processes
IS/IT Strategy
IS/ITTransformation
OrganisationalInfrastructure
and Processes
Business Productsand Services
IS/IT Productsand Services In
tern
al
BusinessTransformation
Ext
erna
l
Business Strategy
Business Domain IT Domain
Adapted from Henderson & Venkatraman, 1992
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Problems and Possibilities
• How can we align IS, KM and the Business?
• Should KM be on the right or the left of the diagram?
• How can we balance and align these different business and technical activities?
• Can we also be agile in reacting to opportunities?
• How might the Balanced Scorecard help?
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Beyond Alignment is Agility & Innovation
• Strategic IT investments that will change the enterprise– Web 2.0 and Interactive platforms
• A climate of continuous change is more powerful than globalisation– Project requirements will change (long) before the
project is complete.
• Agile Enterprise Management is needed to thrive in an environment of continuous change
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What is Enterprise Agility?
• The ability to respond to market challenges and opportunities fast enough so as to enhance or maintain enterprise value.– Is it better to focus on efficiency or value-
added?• Rapid decision making is a key to agility• Agile management is a critical part of an
agile enterprise.
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Agile Management Structures
• Have highly distributed power coupled with the authority (and willingness) to make decisions– Information must be readily available– Clear rules and lines of responsibility– Instant access to knowledge and communities
of experts– When change is the competitive driver, nothing
is sacred
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In an agile enterprise…
• Leadership must be collaborative• Strategic planning and action are no longer solely
the prerogative of the CxOs– Business unit managers and business developers must
be involved too• Reliance on Web 2.0 social networking
applications will become commonplace• The right IT must be in place (not just EIS) where
IT complexity is managed and Web 2.0 is leveraged at the enterprise level.
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Imagine…
• That you are the CKO in QR, a local logistics firm. The CMkO has identified a major new customer who needs guaranteed capacity, minimal bureaucracy, tight deadlines, and offers small profit margins. Gaining this contract will cause QR to expand 20% with up to 35% more profit.
• The CMkO will make the decision, but needs your support in determining if QR can do it. Moreover, there is little time – the decision must be reached in 6 hours.
• Who do you need to talk to? Where are these people located? Can you collect the information needed and satisfy the CMkO that QR should or should not work with the new customer? You need to be certain that you are correct – if you argue in favour but later the details are shown to be false, you will be fired.
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Alignment and Accountability
• Ten years ago, CIOs were expected NOT to understand the business
• Today, if you don’t understand the business, you can’t be a CIO/CKO.
• If a new system/product that the CIO delivers does not achieve the expected business value, it is the CIO’s fault (no one else’s).
• The CKO is accountable for knowledge-related decisions in the firm.
• IT-KM-Business Alignment also means IT-KM-Business Accountability
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Innovation at Haier
• Haier prides itself on innovation• Each employee, individually, is encouraged to
be innovative, to be responsible for a personal contribution to the firm’s success
• This requires a very special organisational culture– That rewards individual initiative
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The Balanced Scorecard
• One way to achieve alignment, accountability and agility is to use the Balanced Scorecard (BSC) (Kaplan & Norton, 1996).
• The BSC was designed, in recognition of the limitations of financial accounting measures:
• They provide a narrow and incomplete picture of business performance
• They hinder the creation of future business value
• They are lagging not leading measures
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Financial PerspectiveAre we meeting the
expectations of shareholders?
Customer PerspectiveAre we delighting (or at least satisfying) our customers?
Internal Process Perspective
Are we doing the right things? Are we doing things right?
Learning and Growth Perspective
Are we prepared for the future?
Adapted from Kaplan & Norton (1992)
Perspectives & Relationships in the Balanced Scorecard
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Translating the Vision into Desired Outcomes
VISIONIntended Direction/Destination
Balanced ScorecardWhat do we want to achieve?
STRATEGYHow will we achieve “success”?
Strategic InitiativesWhat do we need to do?
Personal InitiativesWhat do I need to do?
DESIRED OUTCOMES
Satisfied Shareholders
Delighted Customers
Effective & Efficient
Processes
Motivated & Prepared Workforce
Martinsons, 2005
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From Desired Outcomes to Initiatives
Motivated & Prepared
Workforce
Motivation
Preparation
What initiatives will • improve employee motivation?• better prepare employees?
but also what initiatives will• create more efficient / effective processes?• delight customers?
Martinsons, 2005
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MTR Corporate Strategy Map
Revenue OperatingCost
ShareholderValue
Satisfaction Index
Market Share Patronage
Safety Index Service Pledge
Talent LeadershipManpower & Succession
StrategicAlignment
Partnering & Teamwork
Employee Satisfaction
CultureOrganisational
Capability
Customer
Processes
Financial
Learning & Growth
© MTR, 2005
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Southwest Airlines
• Southwest uses a different balanced scorecard layout to achieve the same kind of planning objective.
• Note the detailed objectives, measures, targets, and initiatives.
• This is a general BSC – not IS specific – but note that IS will play a critical support role, e.g. in data collection/analysis.
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Airline Scorecard Parameters
Objectives
• Fast ground turnaround
Objectives:What the strategy is trying to achieve
Targets
• 30 Minutes• 90%
Targets:The level of performance
or rate of improve-
ment needed
• Cycle time optimization
Initiatives:Key action programs
required to achieve targets
InitiativesMeasures
• On Ground Time• On-Time
Departure
Measures:How
success or failure is
monitored
Strategic Theme: Operating Efficiency
Profits and RONAFinancial
Learning
Ground crew alignment
Lowest prices
Fewer planes
Customer
Internal
Fast ground turnaround
Strategy Map
On-time Service
Attract & Retain More Customers
Grow Revenues
Wagner, 2003
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• % Ground crew trained
• % Ground crew stockholders
The Scorecard is a Programme for ActionObjectives Measures
• # Customers• FAA On Time
Arrival Rating• Market Survey
• On Ground Time• On-Time
Departure
Strategic Theme:Operating Efficiency
Initiatives
• Cycle time optimization
• Ground crew training
• ESOP
• Customer loyalty program
• Quality management
Targets
• 30% CAGR
• 20% CAGR
• 5% CAGR
• 12% growth• Ranked #1• Ranked #1
• 30 Minutes• 90%
• yr. 1 70%
• yr. 3 90%
• yr. 5 100%
• Profitability
• Grow Revenues
• Fewer planes
• More Customers • Flight is on-time• Lowest prices
• Fast ground turnaround
• Ground crew alignment
Strategic Theme: Operations Excellence
Profits and RONAFinancial
Learning
Ground crew alignment
Fewer planes
Customer
Internal
Fast ground turnaround
Strategy Map
Attract & Retain More Customers
Grow Revenues
Lowest prices
On-time Service
Wagner, 2003
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• IS dept is an internal service supplier• IS projects are carried out for end-
users and the organisation• Four Perspectives for IS
–business value– internal processes –user orientation– future readiness
What About a Balanced IS (or KM) Scorecard?
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Business Value Perspective
Are we satisfying management?Are we adding value?
User Perspective
Are we delighting (or at least satisfying) our users?
Internal Process Perspective
Are we doing the right things? Are we doing things right?
Future Readiness Perspective
Are we ready for the emerging technologies & practices?
The Balanced IS Scorecard
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• Extension to the BSC– innovation and learning (future readiness)– the specifics of monitoring and control (key measures)
• Measuring and evaluating business value– short-term cost-benefit evaluation
• cost control, selling to third parties– long-term perspective (based on information economics)
• business value of IT project, strategic options and risks• business value of IT department/functional area
Measuring and Evaluating IS (1)
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• Measuring and evaluating user orientation–metrics for being the preferred supplier of
applications and operations–metrics for building and maintaining
relationships with users–metrics for satisfying end-user needs
Measuring and Evaluating IS (2)
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• Measuring and evaluating internal processes– The planning and prioritization of IS projects– The development of new IT applications– The operation and maintenance of current IT
applications
• Measuring and evaluating future readiness– Improving the skill set of IS specialists– Updating the applications portfolio– Putting effort into researching emerging technologies– Ensuring knowledge is central to future work
Measuring and Evaluating IS (3)
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• Develop awareness of the BSC/IS concept• Collect and analyse data• Define company-specific objectives & goals• Develop preliminary BSC/IS• Solicit stakeholder comments and feedback• Reach a consensus on BSC/IS• Communicate both BSC/IS and its
underlying rationale to all stakeholders
Building a Balanced IS Scorecard (1)
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• Three principles for BSC– Cause-and-effect– Performance drivers– Linkage to financial measures
• Three criteria for BSC/IS metrics– quantifiable– easy to understand– cost-effective to measure
• One over-riding concern– Ensure that the BSC/IS is aligned with the corporate
BSC
Building a Balanced IS Scorecard (2)
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Perspectives Objectives Measures Targets Initiatives
Business Value Increase profit
$ 10% CAGR
User Delighted users from
other departments
User satisf-action index
95% satisfied by 2010; 99%
by 2011
Involve users in systems
design
Internal Process
? ? ? ?
Future Readiness
Highly Skilled IT
staff
Professional & Academic
Qualifications
100% with MSc by 2009; 75% with PhD
by 2012
Unlimited training budget
BSC for the IS Support Unit of a Global Airline
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Activity Questions for Slide 38
• 1. Suggest suitable internal process objectives, measures, targets and initiatives.
• 2. Explain why the user perspective initiative may not result in the the intended objectives being achieved.
• 3. Why is it so critical that the IS support unit establish relationships between initiatives and objectives in its BSC?
• 4. How should this BSC/IS be aligned with the corporate BSC?
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• Errors to Avoid– failure to include specific long-term objectives– failure to relate key measures to performance drivers by
means of cause-and-effect relationships– failure to communicate the contents of, and rationale for
the BSC/IS– failure to integrate the BSC/IS with a corporate BSC
• All employees should be encouraged to use the BSC to gain a holistic understanding of the organisation
Lessons 1
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Lessons 2
• Critical Success Factors– Identify key cause-effect relationships, performance
drivers and measures• This is very hard for non-financial/quantifiable measures
– Make measures simple and measurable• Very hard to collect reliable data, but IS can help
– Maintain intra-organisational communication– Link BSC/IS to performance appraisal criteria for
individual IS specialists– Ensure staff awareness of the BSC and its value.– Think about the impact of cultural and institutional
factors
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And Now…– Time for you to create a BSC for the IS or KM
function of a company with which you are familiar• It could be a company from your project• In fact, you could use the BSC in your project!
– Use the blank sheet available from the course web page – and when you are done, email it to me.
– Feel free to adapt the blank sheet to your own needs, design, etc.
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References• Chan, Y.E. (2002) Why Haven’t We Mastered Alignment? The Importance of the
Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112.• Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill.• Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information
Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16.• Kaplan, R. and Norton, D. (1992) The balanced scorecard ‑ measures that drive
performance, Harvard Business Review, 70, 1, 71‑79.• Kaplan, R. and Norton, D. (1993) Putting the Balanced Scorecard to Work, Harvard
Business Review, 71, 5, 134‑142.• Kaplan, R. and Norton, D. (1996) Using the Balanced Scorecard as a Strategic
Management System, Harvard Business Review, 74, 1, 75‑85. • Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into
Action, Boston: Harvard Business School Press.• Martinsons, M.G., Davison, R.M. and Tse, D. (1999) A Foundation for the Strategic
Management of Information Systems, Decision Support Systems, 25, 71-88.• McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a
Course, Harvard Business Review, 61, 1, 145-156.• Reich, B. & Benbasat, I. (2000) Factors that influence the social dimention of alignment
between business and information technology objectives, MIS Quarterly, 24, 1, 81-113.