it strategy the effective management of it organizations in the dynamic business environment of the...
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IT StrategyThe effective management of IT organizations in the
dynamic business environment of the 21st century demands that senior IT managers work with senior
functional (e.g., marketing, R&D, finance) managers to develop IT strategies that are aligned with the firms
strategy for sustainable competitive advantage.IT management must be continuously aware of the
opportunities to transform the firm.The process for developing strategy must
demonstrate the opportunity for IT to enable or drive business strategy and operational effectiveness and
efficiency.Alignment addresses both how IT is in harmony with
the business, and how the business should, or could, be in harmony with IT.
IT Strategy are divided into further activities and focus areas
IssuesHypotheses
AnalyticsConclusions
IT Strategic Initiatives
Study Scopeand Objectives
Company's Objectives
IT Plan
Business Strategy
Business Capabilities
Business Scenarios
Business CapabilityDescriptions
Business Structure
IT Capabilities IT Capabilities
IT Vision
IT Vision
Application Functionality
IT Current AssessmentIT Requirements
Technical Infrastructure
IT GovernanceIT
OrganizationIT Management
SystemIT
Processes
Positioning
Environment
Configuration
Implementation
Gap Analysis
Existing Conditio
n(Where are we now)
Expected Condition(where we are going
to)
Planning
(How reaching
of)
Vision, Mission, Strategy, Responsibility and
Priority
Cost Estimate
Condition Assessmen
t
1st STEP4th STEP
3rd STEP
ICT GRAND DESIGN STEPS
2nd STEPDetermining
expected Level .
Create Plan &
Strategy
DefineRealisation
OrganizationPlans
IdentifyOpportunities:Early Wins &Long-Term
Information Tech.Planning
Define OrganizationValue
Propositions &Needs
Phase 5
Methodology
ReviewExisting
Direction & Plans
Conduct SWOT Analysis
DefineOrganization
ValueChain(s)
Phase 1
OrganizationEnvironment
Define “Should Be”
Competences
Define“Should Be” Capabilities
on the Value Chain(s)
Define“Should Be”
Strategic Focus Model
Phase 2
To-Be Scope& Competencies
Refine“Should Be”to “To Be”
Determine“As-Is /
Should Be”Gap Analysis
Define“To Be”
Governance
Phase 4
Gap Analysis/Governance
Define “As-Is”
Competences
Define“As-Is”
Capabilitieson the Value
Chain(s)
Define“As-Is”
Strategic Focus Model
Phase 3
As-Is Scope& Competencies
VisionMission
Goals & Targets
MANAGEMENT STRATEGIC PHASE VISION & MISSION DETERMINING ENVIRONMENT STUDY STRATEGY FORMULATIONFORMULATION ACTION or IMPLEMENTATION CONTROL & EVALUATION :RE-STUDY, MEASURING PERFORMANCE & CORECTIF ACTION
DEFINITIONDEFINITION•Science concerning formulation, execution and decision evaluation by comprehensive to reach the organization objective.
ACTIVITIESACTIVITIES•VISI•MISI•OBJECTIVE•ANALYSIS(SWOT : STRENGTH & WEAKNESS, THREAT & OPPORTUNITIES)•STRATEGY & POLICY•PROGRAM & ACTIVITIES•BUDGETING
KEY : ADAPTATION BY MANAGEMENT CHANGESKEY : ADAPTATION BY MANAGEMENT CHANGES
STRATEGYSTRATEGY•Derived from Greek, means “the art of the general”•About making choices that include :The selection of business goals.The choice of products and services to offer.The design and configuration of policies that determine how the firm positions itself to compete in its markets.The appropriate level of scope and diversity.The design of organization structure, administrative systems, and policies used to define and coordinate work. VISION, MISSION AND STRATEGYVISION, MISSION AND STRATEGY
Mission (What?)
Strategy (How?)Bridge between Vision & Mission
Big Hairy Audacious Goals“BHAGs”
Implementation
Objective
s
With plans
Time
Ana
lysi
s
Measurements
Vision (Where?)
Formulation of Strategy VISION MISSION STRATEGIC OBJECTIVE
Having three keys elementsHaving three keys elements
Mission (What?)
Strategy (How?)Bridge between Vision & Mission
Implementation
Objective
s
With plans
Time
Ana
lysi
s
Vision (Where?)
Vision Statement Imaginable, conveys a picture of what the future will
look like. Desirable, appeals to the long-term interests of
employees, customers, stockholders, and other who have a stake in the enterprise.
Feasible, comprises realistic, attainable goals. Focused, is clear enough to provide guidance in
decision making. Flexible, is general enough to allow individual initiative
and alternative responses in light of changing conditions.
Communicable, is easy to communicate, can be successfully explained within five minutes.
Measurable, stakeholders will clearly see that they have attained the goal.
“Where Do We Want To Go?”An Effective Vision, is :
State the vision and long term direction
Mission Begins with the mission of the IT function, the
reasons the IT function exists. A mission statement for IT is a concise
statement of what business the group is in. The company mission should be reviewed to
identify ideas or themes for the IT mission. IT strategies that are formulated that are
inconsistent with the mission or the core values of their company run a very high risk of failure.
“What are we?”
“To develop, implement, and maintain high-quality efficient and effective business systems that provide the information needed to support the daily operation and strategic business direction of the business at a level superior to the competition with customer satisfaction as the end goal”
Example :
Mission Statement To be architects of alignment linking
Business and IT. The metaphor of architecture is chosen
because the IT strategy is not just about technology.
IT strategy is about the purposeful creation of integrated environments that leverage human skills, business processes, organizational structures, and technologies to transform the competitive position of the business.
Strategic Objectives
How the vision will be accomplished over the time period identified in the vision?
An effective strategy is aligned with the mission and core values of the company and provides the “architectural bridge” between the mission of the company and the vision.
“How will we achieve this vision?”
State the desired goal State the desired objective Use multiple points if necessary
Goal and Objective
Today’s Situation
Objective
Goal
multiple points
Today’s Situation Summary of the current situation Use brief bullets, discuss details verbally
Hyper Competition. Global Markets. The other influence of the 21st century business environment on IT strategy.
Mutually Supporting, Company’s Ability to respond to increasingly uncertain and evolving markets.
Scanning the External EnvironmentEnvironmental Scanning.
The process of studying the environment of the organization to pinpoint opportunities and threats.
Environment Changes Impacting ITGovernmental regulationsEconomic conditionsGeographic and competitive concernsWorkforce composition
ENVIRONMENT APPROACH
Analysis
Method
Evaluation
Survey
Revision
Creation
TOP-DOWN APPROACHTOP-DOWN APPROACHGoal & Objective
BOTTOM-UP APPROACHBOTTOM-UP APPROACHExisting System
ICT GRAND DESIGNICT GRAND DESIGNEXTERN-INTERNEXTERN-INTERN
APPROACHAPPROACHDeveloping System
How Did We Get Here? Any relevant historical information Original assumptions that are no longer valid
In this role IT Managers need to :Be knowledgeable about how the new IT technologies can be integrated into the business as well as among the different technologies and architecture.Be privy to senior management’s tactical and strategic plans.Be present when corporate strategies are discussed.Understand the strengths and weaknesses of the technologies in question and the corporate wide implications.
IT Strategy
Regardless of whether the business is in the manufacturing or service sector, most business is information based.
The ubiquity of IT in manufacturing and services throughout the world has made the market value of physical products and processes less important than the knowledge and information embedded.
A turbulent business environment demands organizations that have adaptive processes, that are not merely flexible, but also aligned with the changing information requirements of the organization and the external environment.
Business processes are coordinated activities that involve people, procedures, and technology.
A set of decisions made by IT and functional senior management that either enable or drive the business
strategy.The development of an aligned IT strategy is critical in today's business environment for several reasons :
IT and Business Transformation
In formulation of an IT strategy, technology can drive business transformation as well as enable transformation.
The evidence that IT can transform business has been amply documented.
In the role of transformation driver the IT strategy becomes the Business strategy, offering novel and competitively differentiating ways of doing business.
In its role as transformation driver IT can create and exploit new markets, link customers more tightly to the firm, and define new standards of operational excellence for the industry.
For Example : E-Business
DEVELOPMENT STRATEGYWhere is the
business going and Why
Direction for Business
Needs &Priorities
Infrastructure& Services
SupportBusiness
What is require
How it can be delivered
IS/ITImpact & Potential
Business Strategy•Business Direction
•Objective and Direction•Change
IS Strategy•Business Based•Demand Oriented•Application Focused
IT Strategy•Activity Decision•Supply Oriented•Technically Focused
Unfortunately, IT can also an inhibitor to Business Transformation
When the IT Strategy is not aligned with the Business Strategy.
Over-emphasis by IT Management and Business Management. Due to communications issues between the different “culture” of management, are :* The “executive” culture, focused on maintaining an organization’s financial health and deals with boards of directors, investors, and markets.* The “engineering” culture, represents the people who work with the various technologies of the organization and how those technologies are to be used.* The “operator” culture, evolves locally in an organization or business unit and is based on human interaction.
Failure of IT and Business Management to recognize that effective use of IT requires business process change.
This situation occurs through several mechanisms :
Strategy Alignment•The concept of strategic alignment stresses the harmonization of the goals and implementation plans of IT with the goals and organizational structure of the business.•One of the major concerns of key business leaders has been the alignment of business goals and IT goals.•IT executive must understand the strategic goals of the business in dynamic and uncertain environment, choices of technology support that will enhance competitive advantage.•Refer specially to the coordination of an organization’s external business and IT goals and its internal business and IT organizational infrastructures.
Strategy AlignmentThe concept of strategic alignment is based on two fundamental assumptions
•External domains concerned : The Scope of the Firm’s Business, (customer, products, markets, and competitors).The Distinctive Competencies, (core competencies and critical success factor that provide competitive advantage).The Governance of the Firm, (impact of regulatory agencies on strategic choice).
•Internal domains concerned :Administrative (organizational) Structure, (functional, matrix, decentralized, process-based, geographic and organizational structure).Critical Business Processes. (critical processes).Human Resources Skills. (acquisition and development of the skills of the people required to manage and operate the firm’s key business activities.•The Dynamic Nature of Strategic FitA firm’s competitors will eventually imitate any strategic choice, thereby rendering temporary any competitive advantage obtained from a specific technology or suite of applications.From an IT management perspective, strategic fit also implies the need for the organization to develop and sustain capabilities that leverage IT to generate sustainable competitive advantage.
Strategic FitBUSINESS
•The concept of strategic alignment is based on two fundamental assumptions•External domains concerned : The Scope of the Firm’s Technology, the critical technologies and suite of applications that impact and support business strategy decisions and initiatives. (data mining, neural networking, data visualizations, internet, sales force automation, collaborative software, imaging system RDBMS)Systemic Competencies, analogous to a firm’s distinctive business com, these are technology capabilities (connectivity, customer information).IT Governance, analogous to the choices of business strategic alliances or external relationships (vendors and consultant).•Internal domains concerned :IT Architecture, the principles that guide choices and decisions about the selection of technology infrastructure as well as the structures and models used to define data and information, network, applications and systems.IT Organizational Processes. The activities and task that are critical to the operation of the IT organization such as system development or IT operations (data center) management. (critical processes)IT Skills, the acquisition and development of the people needed to manage, operate, and design the IT infrastructure of the firm. Analogous to the firm’s key business skills, Human Resources considerations specific to IT (hiring, firing, retention, training, assessing) are also considered.
INFORMATION TECHNOLOGY Strategy Alignment
Business ScopeDistinctive CompetenciesBusiness Governance
Strategic Alignment Model (SAM) ComponentsStrategy Alignment
I. Business Strategy
II. Organization Infrastructure and ProcessesAdministrative StructureProcessesSkills
III. IT StrategyTechnology ScopeSystemic CompetenciesIT Governance
IV. Infrastructure and ProcessesArchitectureProcessesSkills
The Strategy Alignment Model IT
Functional Integration
BUSINESSBusiness Strategy
businessscope
businessgovernance
distinctivecompetencies
IT Strategy
technologyscope
ITgovernance
Systemiccompetencies
Organizational Infrastructure
administrativestructure
skillsprocesses
IT Infrastructure
ITarchitecture
skillsprocesses
Stra
tegi
c Fi
t
How to make Fit Business & IT Strategy?How to integrated infrastructure IT with Organizational infrastructure?
Ideally, the choices made in the IT strategic domain will shape and support the business’s strategic choices.Given the potential of IT to offer competitive business advantage, the linkage among the externally focused choices made by IT management and the strategic choice made by senior business management needs to be explicitly accounted for.
Functional IntegrationStrategy Alignment
the linkage between the IT strategy domain and the business strategy domain In the strategic Alignment Model.
Strategic Integration
the internal domains of business and IT need to be integrated such that the capabilities of the IT infrastructure support the requirements and expectations of the business’ organizational structure and process.
Operational Integration
Source: Bernard Boar, Strategic Planning for IT
EXECUTION
CONCLUSIONS
Directives & Assumptions
BUSINESS SCOPE
Position SituationalAnalysis
Assessment
IT Strategy Methodology
FUTURE BUSINESS
Objectives StrategyStatement
ChangeManagement
Plan
Strategic Moves
Commitment Plan Goal
Strategy
Planning IT Strategy The Objective, will be describe a process that can
be used by IT management to envision and plan an aligned IT strategy.
The process is heavily grounded in the concepts underlying the strategic alignment model and has the objective of providing the tools and techniques to assist IT management in formulating an IT strategy that can enable or drive the transformation of the business.
At a high level, the IT strategy formulation process can be described as a sequence of activities that transforms the current alignment state to the envisioned future alignment state.
The future alignment state has the required condition that it enables sustainable competitive advantage.
IT Strategy
IT Strategy Planning Activities Obtaining an Executive Champion/Sponsor. Forming the Team. Describing the “As-Is” State. SWOT Analysis. The “Strength”. The “Threat”. Strategy Alternative Analysis. IT Strategy Implementation Planning.
IT Strategy
IT Strategy Formulation Process
ObtainSponsor/Champion
FormThe
Team
“As-Is”State of theorganization
GapAnalysis
StrategyAlternatives
analysis
SWOTAnalysis
PorterIndustry
Profitabilityanalysis
AnsoffProductMarket
analysis
“To-Be”State of theorganization
Strategyalternatives
StrategicAlignmentMaturity
Implementationplan
MeasurementCriteria
Environment
turbulence
PeriodicReview
1
2 3 3a
4
5 6
7
8
Obtaining an Executive Champion/Sponsor
Power Pain Vision Resources The Long View Sensitivity Scope A Public Role A Private Role Consequence Management Techniques Monitoring Plans Willingness to Sacrifice Persistence
IT Strategy
•Establishing harmony among IT and Business strategies is a key objective of the firm, having the right senior executive sponsor essential for successful IT strategy formulation.
ObtainSponsor/Champion
FormThe
Team
1
2
Obtaining an Executive Champion/Sponsor
A senior business executive Who has the compelling vision of the “to be” state affairs. Willing to lend his/her organizational credibility and
reputation to the idea being advocated and communicates this vision of a future state to all levels of the organization.
Ideally, has the “power” and “vision” attributes described above.
Tend to be more focused on communicating the vision and driving the organization to embrace his/her vision.
IT Strategy
•The difference in roles between a Champion and SponsorChampion
A senior business executive Who uses his/her organizational influence to obtain the
resources needed to implement the champion’s vision. Tend to be more focused on the aspects and details of
strategy execution, including monitoring of progress against objectives.
They typically are the source of funding and play an important role in ensuring cross organizational change.
Sponsor
Forming the Team IT management should from a team of senior decision
makers from the corporate IT and (if applicable) business unit IT organizations as well as senior business management from the business units.
Minimally, the corporate CIO and respective divisional or business unit CIO’s should be part of this team.
It is also strongly recommended that the team include the corporate systems architect if the organizational structure accommodates this role.
It is strongly recommended that the team be constraint in size to about the dozen members for effectiveness.
Once formed, the team and the sponsor/champion must quickly establish a joint understanding and commitment to the goals and objectives of IT strategy formulation and its outcomes.
Describing the “As-Is” State This activity describes the current state of
the firm in terms of the component of the strategic alignment model.
Needs to specify both the business strategy and organization infrastructure and process domains as well as the domains that pertain to the IT organization.
IT Strategy
“As-Is”State of theorganization
3
•The “As-Is” becomes a baseline for senior business and IT management for articulating the firm’s strategic positioning in the marketplace for the business as well as understanding the firm’s strategic positioning in the IT marketplace.•The “As-Is” also reveals relationships among the components of the firm’s business and IT strategies that are usually not well understood or taken for granted.•Example : Often a source of misalignment through the effects of culture on governance mechanisms.
Performing the SWOT Analysis Strengths
Weaknesses Opportunities Threats
IT Strategy
SWOTAnalysis
PorterIndustry
Profitabilityanalysis
AnsoffProductMarket
analysis
4
5 6 •Confronting the firm.•Identify factors that may affect desire future outcomes for the company.
•The SWOT’s objective is to recommended strategies that ensure the best alignment between the external environment and internal situation.•The SWOT analysis is informed by several important analysis methods that will influence the analysis and selection of strategy alternatives.
The “Strength”IT
Strategy
•Component of the SWOT Analysis is informed by two important components from the “As-Is” description of the firms
•Distinctive Competences. The critical success factors and core competences that provide a firm with a potential competitive edge. (include : brand, research, manufacturing and product development, cost and pricing structure, sales and distribution channels).•Systemic Competencies. Those capability (access to information about costumer) and critical success factor that are important to the creation/achievement of a company’s strategies and that distinguish the IT services of the firms.
SWOTAnalysis
PorterIndustry
Profitabilityanalysis
AnsoffProductMarket
analysis
4
5 6Strategy
alternatives
The “Strength”IT
Strategy
Brand and Reputation Ability to control distribution of products Ability to drive or influence industry
standards Enabling of new strategies First to market or proprietary products Its ability to innovate (and continuously
innovate) Price and cost leadership Customer intimacy and customer knowledge Proprietary Technology Skilled employees
•Agreement by the strategic planning team on the strengths of the firm is essential to creating an effective strategy, because these differentiating possibilities of strengths can be leveraged to generate sustainable competitive advantage. A firm’s strengths can include :
The “Weaknesses”
Ability to withstand risk Adequately trained staff Change management Inadequate finances Decreasing demand for products or services Narrow product line (or a product line that’s too
broad) Obsolete products, facilities or processes Price and cost laggards Poor brand image or quality Poor skills Vulnerability to price changes or suppliers Weak market share or distribution system Weak management team
•Component of the SWOT analysis comes from observation of the existing business and IT problems of the firm.•Weaknesses (gaps) will also emerge from observation of the gaps that exist between the desired state of IT-business alignment (the “To-Be” state) and the current state of IT-business alignment (the “As-Is” or current state).•Need to be recognized are concerned with those that affect a firm’s strategic positioning and its ability to compete effectively.•Some examples of the weaknesses, include :
The “Opportunities”•Component of the SWOT analysis is completed by using the Ansoff Matrix. A model that examines the competitive positioning of a firm based or the relationship between new and current products (or services) and current market.•The Ansoff Matrix is especially useful, in examining growth strategies and becomes the starting point in the IT strategy planning process for examining strategic alternatives and the enabling impact of IT on these strategies.
Present ProductMarket
Penetration(current products,current markets)
1
MarketDevelopment
(current product,new markets)
3
New Product
Diversification(new products,new markets)
4
ProductDevelopment
(new products,current market)
2
PresentMarket
NewMarket
•Where should we look for the next wave of profitable growth opportunities, and where might they lead?•How should we select from the several different opportunities before us today?•What defines our business boundaries, and what is the measure of leadership that we strive to attain?•Is it time to consider redefining fundamentally some of the elements of our core business, and how should we go about doing that?
The “Opportunities”•When examining each of that market positioning strategies, senior IT management and counterparts should consider the following questions regarding growth strategies :
•Market Penetration(current products, current markets)
Market Development(current product, new markets)
Diversification(new products, new markets)
•Product Development(new products, current market)
•Use where there is still potential for an existing product/service in the current marketplace.•Deepen and broaden relationships with existing Customers to sell more of what the organization currently sells to them•Useful for selling new products/services to a strong existing customer base.•Anticipating the needs of the existing customer base by building greater customer intimacy.
•High risk, “new business” approach where the organization does not have the strength of a known customer base or track record in the new product/service.•Defining new markets or market niches with innovative new product.
•Taking existing products/services into a new geographical or market sector.•Developing understanding of where existing products or services may meet the needs of new customers
The “Opportunities”Market Positioning Strategy Strategy Objectives/Implications
The “Threats”IT
Strategy
Rivalry Between Existing Firms The Risk of New Entrants The Power of Buyers The Power of Suppliers The threat of Substitutes
•Portion of the SWOT analysis employs an expanded model of “Porter’s Five Forces Model of Industry Profitability” to identify the threats facing a firm from external sources.•“Porter” argues through the model that industry profitability is a function of five distinct external forces that shape competition, and not just a function of the traditional rivalry between firms.•Identifying and understanding the five forces that influence competition within a firm’s industry provides powerful insight regarding the strategic positioning a firm should consider in countering external threats, are :
The “Threats”IT
Strategy
Political and Legal Environment Macroeconomic Environment Social Environment Technical Environment Demographic Environment
•Also important for an organization to consider the impact of its environment on any strategy it is considering, include :
The “Threats” IT Strategy
PotentialEntrants
Adopted from Porter’s “Five Competitive Forces” Model of Industry Profitability
IndustryCompetitors
Rivalry amongExisting Firms
Substitutes
Suppliers Buyers
Threat of New Entrants
Bargaining Power Of Buyers
Bargaining Power Of Suppliers
Threat of Substitute Product of Services
MacroeconomicEnvironment
TechnicalEnvironmen
t
Political & Legal
Environment
DemographicEnvironment
SocialEnvironment
Complementors
Strategy Alternative Analysis
“As-Is”State of theorganization
GapAnalysis
StrategyAlternatives
analysis
SWOTAnalysis
PorterIndustry
Profitabilityanalysis
AnsoffProductMarket
analysis
3
4
5 6
Activities of IT Strategy Formulation Process•The threat post by each one of these force should be ranked on a scale of 1 (weak) to 5 (strong) to determine the role each competitive threat plays in the IT strategies identified in the Ansoff Matrix. A company whose strategy and market position provide a good defense against the forces can earn above average profits even when some or all of the five forces are strong.•The most promising 3-4 IT strategies identified in the Ansoff Matrix should be identified as those having :
•Articulating the potential costs and benefits of each of the alternative IT strategies. This should not be an exhaustive time consuming exercise, but should attempt to quantify broad dimensions of cost and benefit (and dependencies) for each IT strategy such that reasonable conclusions can be reached about the attractiveness of a particular approach.•Another technique that can be used to evaluate alternative IT strategies is scenario planning.
1. The lowest potential vulnerabilities to the threats identified in the Competitive Focuses analysis.
2. The highest potential ability to leverage the strengths identified in the SWOT analysis.
3. The highest potential to close the gaps identified between the “As-Is”.
4. The highest potential to mitigate the weaknesses identified in the SWOT analysis.
IT Strategy Implementation Planning
•Much to the distress of strategy theorists, who focus on the formulation of the strategies, surveys of strategy practioners have revealed that less than 10 percent of effectively formulated strategies are actually implemented.•Further analysis on the failure of CEO’s concluded that the lack of ability of their firms to execute the strategy.•Considerations on planning for the implementation of an IT Strategy, include :
Commitment and Engagement of Senior Business Management.
Strategic Alignment Maturity. Adoption of Measurement Criteria.
“To-Be”State of theorganization
Strategyalternatives
StrategicAlignmentMaturity
Implementationplan
MeasurementCriteria
3a
7
Periodic Review
All strategies need to be periodically review to ensure that : The initial assumptions made
about markets and external forces are still correct, especially if the company exists in an environment of significant uncertainty.
Implementation plans are on schedule and meeting established milestones.
Measurement are being captured and reported and that these measurement support ongoing alignment of IT strategy with the business.
Implementationplan
MeasurementCriteria
Environment
turbulence
PeriodicReview
7
8
Available Options State the alternative strategies List advantages & disadvantages of each State cost of each option
Recommending a StrategyIdeas for Today and Tomorrow
Recommendation Recommend one or more of the strategies Summarize the results if things go as
proposed What to do next ? Identify action items
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