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Developing Business/IT

Strategies

Chapter

11Chapter

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1. Discuss the role of planning in the business use of information technology, using the scenario approach and planning for competitive advantage as examples.

2. Discuss the role of planning and business models in the development of business/IT strategies, architectures, and applications.

Learning ObjectivesLearning Objectives

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Learning ObjectivesLearning Objectives

3. Identify several change management solutions for end user resistance to the implementation of new IT-based business strategies and applications.

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Why Study Planning Fundamentals?Why Study 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 need to create and implement an action plan that allows you to make the transition from an old business design to a new e-business design.

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Case #1: ROI in Business/IT PlanningCase #1: ROI in Business/IT Planning

The Rowe Companies’ ROI Process

• Use simple ROI calculations to help prioritize IT projects for planning purposes

• Also use economic value added (EVA) analysis which takes into consideration the cost of capital for a project, risk factors associated with the project, and a targeted value return percentage

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Case #1: ROI in Business/IT PlanningCase #1: ROI in Business/IT Planning

The Rowe Companies’ ROI Process

• Return on opportunity (ROO) is also used because it combines more than a dozen factors to assess the rate of change in the business environment, the rate of change in business processes and IT infrastructure, the competitive environment, and the value of intangible assets.

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Case #1: ROI in Business/IT PlanningCase #1: ROI in Business/IT Planning

Merrill Lynch ROI Process:

• Risk-and-payback analysis required for every costly technology initiative

• Single standard six-page template used that poses yes-or-no questions to evaluate project success factors coupled with a five-page financial report

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Case #1: ROI in Business/IT PlanningCase #1: ROI in Business/IT Planning

1. What are the benefits and limitations of Rowe Companies’ ROI methods for IT project planning?

2. What is the business value of the ROI methodology required for project planning by Merrill Lynch?

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Case #1: ROI in Business/IT PlanningCase #1: ROI in Business/IT Planning

3. Do you agree with the IT investment decision being made by the Rowe Companies in response to changing economic conditions? Why or why not?

4. How can a company identify, measure, and compare the business/IT innovation as well as the profitability of IT projects in their planning process?

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IT as a Revenue-Producing AssetIT as a Revenue-Producing Asset

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Organizational Planning ProcessOrganizational Planning Process

• Team building, modeling and consensus

• Evaluating what an organization has accomplished and the resources they have acquired

• Analyzing their business, economic, political and societal environments

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Organizational Planning ProcessOrganizational Planning Process

• Anticipating and evaluating the impact of future developments

• Building a shared vision and deciding on what goals they want to achieve

• Deciding what actions to take to achieve their goals

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Organizational Planning ProcessOrganizational Planning Process

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Strategic PlanningStrategic Planning

Definition:

• Development of an organization’s mission, goals, strategies, and policies

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Operational PlanningOperational Planning

Definition:

• Planning done on a short-term basis to implement and control day-to-day operations

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Scenario ApproachScenario Approach

Definition:

• Teams of managers and other planners participate in what management author Peter Senge calls microworld, or virtual world, exercises

• Microworld - simulation exercise that is a microcosm of the real world

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Trends Shaping Strategic PlanningTrends Shaping Strategic Planning

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Why Plan for Competitive Advantage?Why Plan for Competitive Advantage?

• Betting on new IT innovations can mean betting the future of the company.

• Leading-edge firms are sometimes said to be on the “bleeding edge”.

• Almost any business executive is aware of disastrous projects that had to be written off, often after large cost overruns, because the promised new systems simply did not work.

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Strategic Opportunities MatrixStrategic Opportunities Matrix

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What is SWOT Analysis?What is SWOT Analysis?

• SWOT analysis is used to evaluate the impact that each possible strategic opportunity can have on a company and its use of information technology

• Strengths – core competencies• Weaknesses – substandard business

performance• Opportunities – potential for new markets or

innovative breakthroughs• Threats – potential for losses posed by

competitive forces

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Business ModelBusiness Model

Definition:

• A conceptual framework that expresses the underlying economic logic and system that prove how a business can deliver value to customers at an appropriate cost and make money

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Business Model ComponentsBusiness Model Components

• Customer Value – Is the firm offering its customers something distinctive or at a lower cost than its competitors?

• Scope – To which customers is the firm offering this value? What is the range of products/services offered that embody this value?

• Pricing – How does the firm price the value?

• Revenue Source – Where do the dollars come from? Who pays for what value and when? What are the margins in each market and what drives them? What drives value in each source?

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Business Model ComponentsBusiness Model Components

• Connected Activities – What set of activities does the firm have to perform to offer this value and when? How connected are these activities?

• Implementation – What organizational structure, systems, people, and environment does the firm need to carry out these activities? What is the fit between them?

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Business Model ComponentsBusiness Model Components

• Capabilities – What are the firm’s capabilities and capabilities gaps that need to be filled? How does a firm fill these capabilities gaps? Is there something distinctive about these capabilities that allows the firm to offer the value better than other firms and that makes them difficult to imitate? What are the sources of these capabilities?

• Sustainability – What is it about the firm that makes it difficult for other firms to imitate it? How does the firm keep making money? How does the firm sustain its competitive advantage?

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Business/IT Planning ProcessBusiness/IT Planning Process

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Business/IT Planning Process ComponentsBusiness/IT Planning Process Components

• Strategy Development – developing business strategies that support a company’s business vision

• Resource Management – developing strategic plans for managing or out-sourcing a company’s IT resources

• Technology Architecture – making strategic IT choices that reflect an information technology architecture designed to support a company’s e-business and other business/IT initiatives

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What is IT Architecture?What is IT Architecture?

• A conceptual design that includes:

• Technology Platform – networks, computer systems, system software and integrated enterprise application software

• Data Resources – databases• Applications Architecture – business

applications• IT Organization – organizational structure of

the IS function and distribution of IS specialists

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Strategic Positioning MatrixStrategic Positioning Matrix

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Business/IT StrategiesBusiness/IT Strategies

• Cost and Efficiency Improvements – use Internet as a fast, low-cost way to communicate and interact with customers, suppliers, and business partners

• Performance Improvement in Business Effectiveness – widespread internal use of Internet-based technologies to improve information sharing and collaboration within the business and with trading partners

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Business/IT StrategiesBusiness/IT Strategies

• Global Market Penetration – build e-commerce websites with value-added information services and extensive online customer support

• Product and Service Transformation – use the Internet for electronic commerce transaction processing with customers at company websites, and e-commerce auctions and exchanges for suppliers

11 - 32Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Business Application PlanningBusiness Application Planning

Definition:

• Includes the evaluation of proposals made by the IT management of a company for using information technology to accomplish the strategic business priorities developed earlier in the planning process

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Business Application PlanningBusiness Application Planning

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E-business Architecture PlanningE-business Architecture Planning

Definition:

• Combines contemporary strategic planning methods like SWOT analysis and alternative planning scenarios with more recent business modeling and application development methodologies like component-based development

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E-business Architecture PlanningE-business Architecture Planning

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Case #2: Global Application IntegrationCase #2: Global Application Integration

• “A great strategist can’t win a war unless he keeps his lines of communication clear.” -- George Patton

• One of the most persistent technological challenges of global business is getting communications networks to expand in lockstep with the demands of the myriad of business applications.

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Case #2: Global Application IntegrationCase #2: Global Application Integration

1. What business benefits resulted from the integration projects of Johnson Controls and Bank of New York?

2. What challenges surfaced in each project? Were they handled properly? Why or why not?

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Case #2: Global Application IntegrationCase #2: Global Application Integration

3. What change management actions could these companies have taken to increase the acceptance of their IT integration challenges? Explain.

4. Is global application integration simply a matter of providing enough bandwidth to meet the demand on the servers or is there more to it? Provide some examples of your position.

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ImplementationImplementation

Definition:

• A process that carries out the plans for changes in business/IT strategies and applications that were developed in the planning process

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Scope and Level of Business ChangeScope and Level of Business Change

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Intranet Enterprise Portal ChallengesIntranet Enterprise Portal Challenges

• Security• Defining the scope and purpose of the portal• Finding the time and 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

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Enterprise Resource Planning ChallengesEnterprise Resource Planning Challenges

• Getting end user buy-in• Scheduling/planning• Integrating legacy systems/data• Getting management buy-in• Dealing with multiple/international sites and

partners• Changing culture/mind-sets• IT training• Getting, keeping IT staff• Moving to a new platform• Performance/system upgrades

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End User Resistance SolutionsEnd User Resistance Solutions

• Proper education and training

• End user involvement in organizational changes, and in the development of new information systems

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Obstacles to Knowledge Mgmt SystemsObstacles to Knowledge Mgmt Systems

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Dimensions of Change ManagementDimensions of Change Management

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Change Management TacticsChange Management Tactics

• 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 as often as possible, preferably in person

• Make liberal use of financial incentives and recognition

• Work within the company culture, not around it

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Change Management ProcessChange Management Process

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Case #3: Business/IT Planning StrategiesCase #3: Business/IT Planning Strategies

Corning Inc.’s Strategy:

• We want IT people to be talking with the business team about what we are doing to increase the value of the business and focus on projects that either make positive change in the business or help take costs out or improve asset performance.

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Case #3: Business/IT Planning StrategiesCase #3: Business/IT Planning Strategies

Benefit:

• This strategic thinking pays off in budgeting meetings because you’re not discussing the value of the project to the organization. They have already internalized why it’s important. Projects are less likely to be cut in an economic downturn.

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Case #3: Business/IT Planning StrategiesCase #3: Business/IT Planning Strategies

Putting Business Processes First:

• Listen to what operational people are saying

• Only then are opportunities defined followed by business benefits

• Finally define mechanisms to determine whether goals were met

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Case #3: Business/IT Planning StrategiesCase #3: Business/IT Planning Strategies

1. Do you agree with how CIO Richard Fishburn has defended Corning’s IT department from an economic downturn? Why or why not?

2. Why is aligning IT projects with business objectives a good business/IT strategy in challenging economic times? And in good times?

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Case #3: Business/IT Planning StrategiesCase #3: Business/IT Planning Strategies

3. Does Corning’s business/IT planning process for its new supply chain system prove the value of aligning IT with business goals? Why or why not?

11 - 53Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: Change Mgmt ChallengesCase #4: Change Mgmt Challenges

Cincinnati Bell’s Convergence:• The company reorganized itself by

starting with the needs of particular groups of customers and then worked backward to see what the company should look like.

• COO disbanded product and service units and established divisions serving businesses and residential customers.

11 - 54Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: Change Mgmt ChallengesCase #4: Change Mgmt Challenges

Challenges:• Heads of business units were stripped of their

titles and dropped levels

• Customer service reps had to learn to handle calls about any or all services and cross-sell

• Employees feared they would lose their jobs

• Computer systems had to be adapted to new approach

11 - 55Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

Case #4: Change Mgmt ChallengesCase #4: Change Mgmt Challenges

1. Was the reorganization of Cincinnati Bell as revealed in this case a good business strategy? Why or why not?

2. Were the change management methods revealed in this case adequate for the changes being made? Why or why not?

3. What further changes should be made in IT systems to better support Cincinnati Bell’s business convergence? Defend your proposals.

11 - 56Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• Managing information technology requires planning for changes in business goals, processes, structures, and technologies.

• Planning is a vital organization process that uses methods like the scenario approach and planning for competitive advantage to evaluate an organization’s internal and external environments; forecast new developments; establish an organization’s vision, mission, goals, and objectives; develop strategies, tactics, and policies to implement its goals; and articulate plans for the organization to act upon.

11 - 57Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• A good planning process helps organizations learn about themselves and promotes organizational change and renewal.

• Strategic business/IT planning involves aligning investment in information technology with a company’s business vision and strategic goals such as reengineering business processes or gaining competitive advantages.

11 - 58Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• Implementation activities include managing the introduction and implementation of changes in business processes, organizational structures, job assignments, and work relationships resulting from business/IT strategies and applications such as e-business initiatives, reengineering projects, supply chain alliances, and the introduction of new technologies.

11 - 59Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

SummarySummary

• Companies use change management tactics such as user involvement in business/IT planning and development to reduce end user resistance and maximize acceptance of business changes by all stakeholders.

11 - 60Copyright © 2006, The McGraw-Hill Companies, Inc. All rights reserved.

End of Chapter

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