developing business/it strategies

Prof. Anatoly Sachenko

9 Developing Business/IT Strategies

I. LECTURE OVERVIEW

Foundation Concepts: Developing Business/IT Strategies, emphasizes the importance of the planning process in developing IT/business strategies, and the implementation challenges that arise when introducing new e-business strategies and applications into an organization.

Organizational Planning – Managing information technology requires planning for changes in business goals, processes, structures, and technologies. Planning is a vital organizational 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. A good planning process helps organizations learn about themselves and promotes organizational change and renewal.

e-business Planning – Strategic e-business planning involves aligning investment in information technology with a company’s e-business vision and strategic goals such as reengineering business processes or gaining competitive advantages. It results in a strategic plan that outlines a company’s e-business/IT strategies and technology architecture. The technology architecture is a conceptual blueprint that specifies a company’s technology platform, data resources, applications architecture, and IT organization.

Implementing e-business Change – Implementation activities include managing the introduction and implementation of changes in business processes, organizational structures, job assignments, and work relationships resulting from e-business strategies and applications such as e-commerce initiatives, reengineering projects, supply chain alliances, and the introduction of new technologies. Companies use change management tactics such as user involvement in e-business planning and development to reduce end user resistance and maximize acceptance of e-business changes by all stakeholders.

II. LEARNING OBJECTIVES

Learning Objective 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 e-business strategies, architectures,

and applications. Identify several change management solutions for end user resistance to the implementation of new e-

business strategies and applications.

III. LECTURE NOTES

Section I: Planning Fundamentals

INTRODUCTION

e-business technology has created a major shift in the way companies do business. Companies must create and implement an action plan that allows them to make the transition from the old business design to a new e-business design. e-business planning is the

Analyzing The Rowe Cos. & Merrill Lynch:

Prof. Anatoly SachenkoWe can learn a lot about the business value of various business/IT planning methodologies from this case. Take a few minutes to read it, and we will discuss it (See Rowe Cos. & Merrill Lynch in Section IX).

ORGANIZATIONAL PLANNING [Figure 9.2]

The components of an organizational planning process consist of: Team building, modelling, and consensus Evaluating what an organization has accomplished and the resources they have acquired Analyzing their business, economic, political, and societal environment 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.

Plan – the results of the organizational planning process is referred to as a plan. This plan formally articulates the actions that are felt necessary in order to achieve desired goals. Thus, a plan is an action statement. Plans lead to actions, actions produce results, and part of planning is learning from results.

Implementation – the planning process is followed by implementation, which is monitored by control measures, which provide feedback for planning.

Strategic Planning - deals with the development of an organization’s mission, goals, strategies, and policies. Corporations may begin the process by developing a shared vision using a variety of techniques, including team building, scenario modelling, and consensus creating exercises.

Strategic Visioning – team planning sessions frequently include answering strategic visioning questions.

Tactical planning – involves the setting of objectives and the development of procedures, rules, schedules, and budgets.

Operational planning – is planning done on a short-term basis to implement and control day-to-day operations. Typical examples are project planning and production scheduling.

THE SCENARIO APPROACH: [Figure 9.4]


The scenario approach to planning has gained in popularity as a less formal, but more realistic, strategic planning methodology for use by business professionals.

In the scenario approach, teams of managers and other planners participate in simulation exercises where they can safely create, experience, and evaluate a variety of scenarios of what might be happening, to what might happen in the real world.

PLANNING FOR COMPETITIVE ADVANTAGE: [Figure 9.5]

Planning for competitive advantage is especially important in today’s competitive e-business arena and complex information technology environment. So strategic e-business planning involves an evaluation of the potential benefits and risks a company faces when using e-business strategies and technologies for competitive advantage.

Strategic planning models that can be used to generate ideas for the strategic use of information technologies to support e-business initiatives include: Competitive forces model – competitors, customers, suppliers, new entrants, and substitutes. Competitive strategies model – cost, leadership, differentiation, growth, innovation, and alliances.

Prof. Anatoly Sachenko Value chain model – chain or network of basic activities that add value to s product or services – support

processes and primary business processes. Strategic opportunities matrix – evaluate the strategic potential of proposed e-business opportunities, as

measured by their risk/payoff probabilities.

SWOT Analysis:Strengths, weaknesses, opportunities, and threats – SWOT 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 and resources in which it is one of the market or industry leaders. Weaknesses – areas of substandard business performance compared to others in the industry or market

segments. Opportunities – potential for new business markets or innovative breakthroughs that might greatly expand

present markets. Threats – potential for business and market losses posed by the actions of competitors and other competitive

forces, changes in government policies, disruptive new technologies, and so on.

BUSINESS MODELS AND PLANNING

A business model is a conceptual framework that expresses the underlying economic logic and system that proves how a business can deliver value to customers at an appropriate cost and make money. A business model answers vital questions about the fundamental components of a business, such as: Who are our customers? What do our customers value? How much will it cost to deliver that value to our customer? How do we make money in this business?

A business model specifies: What value to offer customers, and which customers to provide this value to using which products and

services at what prices. How the business will organize and operate to have the capability to provide this value and sustain any

advantage from providing this value to its customers.

A business model is a valuable planning tool because it focuses attention on how all the essential components of a business fit into a complete system. Done properly, it forces entrepreneurs and managers to think rigorously and systematically about the value and viability of the business initiatives they are planning. Then the strategic planning process can be used to develop unique business strategies that capitalize on a firm’s business model to help it gain competitive advantage in its industry and the markets it wants to dominate.

e-BUSINESS PLANNING: [Figure 9.8]


Processes, focuses on discovering innovative approaches to satisfying a company’s customer value and business value goals is referred to as e-business planning. This planning process leads to development of strategies and business models for new e-business and e-commerce platforms, processes, products, and services. Then a company can develop IT strategies and an IT architecture that supports building and implementing their newly planned e-business applications.

Both the CEO and the chief information officer (CIO) of a company must manage the development of complementary e-business and IT strategies to meet its customer’s value and business value vision. This co-adaptation process is necessary because information technologies are a fast changing, but vital component in all e-business and e-commerce activities. The e-business planning process has three major components: Strategy Development – Developing e-business and e-commerce strategies that support a company’s e-

business vision, use information technology to create innovative e-business systems that focus on customer and business value.

Resource Management – Developing strategic plans for managing or outsourcing a company’s IT resources, including IS personnel, hardware, and software, data, and network resources.

Technology Architecture – Making strategic IT choices that reflect an information technology architecture designed to support a company’s e-business and e-commerce initiatives.

Information Technology Architecture Note to students that the IT architecture that is created by the strategic e-business planning process is a conceptual design, or blueprint, that includes the following major components: Technology Platform: - The Internet, intranets, extranets, and other networks, computer systems, system

software, and integrated enterprise application software provide a computing and communications infrastructure, or platform that supports the strategic use of information technology for e-business and e-commerce.

Data Resources: Many types of operational and specialized databases, including data warehouses and Internet/intranet databases store and provide data and information for business processes and decision support.

Applications Portfolio: Business applications of information technology are designed as an integrated portfolio of information systems that support strategic e-business initiatives, as well as cross-functional business processes.

IT Organization: The organizational structure of the IS function within a company and the distribution of IS specialists is designed to meet the changing strategies of a business. The form of the IT organization depends on the managerial philosophy, e-business vision, and business/IT strategies formulated during the strategic planning process.


IDENTIFYNG e-BUSINESS STRATEGIES: [Figure 9.9]

A strategic positioning matrix can help a company identify where to concentrate its use of Internet technologies to gain a competitive advantage with E-business and E-commerce. The quadrants of the matrix represent:

Cost and Efficiency Improvements Performance Improvement in Business Effectiveness Global Market Penetration Product and Service Transformation

Cost and Efficiency ImprovementsThis quadrant represents a low amount of internal company, customer, and competitor connectivity and use of IT via the Internet and other networks.

Strategy: Focus on improving efficiency and lowering costs by using the Internet and the World Wide Web as a fast, low-cost way to communicate and interact with customers, suppliers, and business partners.

Example: The use of E-mail, chat systems, discussion groups, and a company Web site.

Performance Improvement in Business EffectivenessA company has a high degree of internal connectivity and pressures to substantially improve its business processes, but external connectivity by customers and competitors is still low.

Strategy: Make major improvements in business effectiveness.

Example: Widespread internal use of Internet-based technologies like Intranets can substantially improve information sharing and collaboration within the business and with its trading partners.

Global Market PenetrationA company that enters this quadrant of the matrix must capitalize on a high degree of customer and competitor connectivity and use of IT.

Strategy: Develop E-business and E-commerce applications optimize interaction with customers and build market share.

Prof. Anatoly SachenkoExample: E-commerce websites with value-added information services and extensive online customer

support. Product and Service Transformation

A company and its customers, suppliers, and competitors are extensively networked. Internet-based technologies, including E-commerce websites, and E-business Intranets and extranets, must now be implemented throughout the company’s operations and business relationships.

Strategy: Develop and deploy new Internet-based products and services that strategically reposition it in the marketplace.

Example: Use the Internet for electronic commerce transaction processing with customers at company Web sites, and E-commerce auctions and exchanges for suppliers.

e-BUSINESS APPLICATION PLANNING

The e-business application planning process begins after the strategic phase of e-business planning has occurred. Application planning process includes: Evaluation of proposals made by the IT management of a company for using information technology to

accomplish the strategic e-business priorities developed earlier in the planning process. Business case for investing in proposed e-business development projects is evaluated by company executives

and business unit managers based on the strategic e-business priorities that they decide are most desirable or necessary at that point in time.

Developing and implementing e-business applications, and managing their development projects.

e-business Architecture Planninge-business architecture planning combines contemporary strategic planning methods like SWOT analysis and alternative planning scenarios with more recent business modelling and application development methodologies like component-based development. e-business (and e-commerce) strategic initiatives, including: Strategic goals, constraints, and requirements, are developed based on SWOT analysis and other planning

methods. Application developers used business process engineering methods to define how strategic e-business

requirements are to be implemented, using organizational, process, and data models to create new internal and interenterprise e-business processes among a company’s customers, suppliers, and other business partners.

e-business and e-commerce component-based applications are then developed to implement the new business processes using application software and data components stored in a repository of reusable business models and application components.

Business process engineering and component-based application development activities are supported by a company’s technology infrastructure, which includes all the resources of its IT architecture, as well as the necessary component development technologies.

e-business architecture planning links strategy development to business modelling and component development methodologies in order to rapidly produce the strategic e-business applications needed by a company.

Section II: Implementing Challenges

IMPLEMENTATION

Implementation is an important managerial responsibility. Implementation is doing what you planned to do. Implementation can be viewed as a process that carries out the plans for changes in e-business strategies and applications that were developed in the planning process.

Analyzing Verizon, F.X. Coughlin, and A-dec

Prof. Anatoly SachenkoWe can learn a lot from this case about the important implementation challenges that arise when implementing new e-business strategies. Take a few minutes to read it, and we will discuss it (See Verizon, F.X. Coughlin, and A-dec in Section IX).

IMPLEMENTING INFORMATION TECHNOLOGY: [Figure 9.15]

Introducing e-business and other applications of information technology impact an organization. Major new e-commerce initiatives can enable a company to redefine its core lines of business and precipitate dramatic changes within the entire interenterprise value chain of an e-business enterprise.

Implementing new e-business strategies requires managing the effects of major changes in key organizational dimensions such as business processes, organizational structures, managerial roles, employee work assignments, and stakeholder relationships that arise from the deployment of new e-business systems.

END USER RESISTANCE AND INVOLVEMENT

“People don’t like change.” End user resistance can be minimized by formal technology implementation programs which end user managers and IS consultants can develop to encourage user acceptance and productive use of reengineered business processes and new information technologies. Some keys to solving problems of end user resistance include: Proper end user education and training Improved communications with IS professionals End user involvement in the development and implementation of new systems. Involvement and commitment of top management and all other business stakeholders.

Direct end user participation in systems development projects before a system is implemented is especially important to reducing the potential for end user resistance. Allow end users members of e-business systems development teams or do their own development work. This involvement helps ensure that end users “assume ownership” of a system, which is designed to meet their needs.

CHANGE MANAGEMENT [Figure 9.17]


People and processes are a major focus of organizational change management. Change management includes activities such as: Developing innovative ways to measure, motivate, and reward performance. Designing programs to recruit and train employees in the core competencies required in a changing

workplace. Analyzing and defining all changes facing the organization, and developing programs to reduce the risks and

costs and to maximize the benefits of change.

Change experts recommend: Involve as many people as possible in reengineering and other change programs. Make constant change 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.

A Change Management Process: [Figure 9.18]


This change management model shows an eight-level process of change management for organizations. This change management model is only one of many that could be applied to manage organizational changes caused by new e-business strategies and applications and other changes in business processes.

IV. KEY TERMS AND CONCEPTS - DEFINED

Business Model: A business model is a conceptual framework that expresses the underlying economic logic and system that proves how a business can deliver value to customers at an appropriate cost and make money.

Change Management:Managing the process of implementing major changes in information technology, business processes, organizational structure, and job assignments to reduce the risks and costs of change, and optimise its benefits.

e-business Planning:Process that focuses on discovering innovative approaches to satisfying a company’s customer value and business value goals. Process leads to development of strategies and business models for new e-business and e-commerce platforms, processes, products, and services.

e-business Planning – Application Planning:Process includes the evaluation of proposals made by the IT management of a company for using information

Prof. Anatoly Sachenkotechnology to accomplish the strategic e-business priorities developed earlier in the planning process.

e-business Planning – Architecture Planning:Planning process that combines contemporary strategic planning methods like SWOT analysis and alternative planning scenarios with more recent business modelling and application development methodologies like component-based development.

e-business Planning – Strategic Planning: Strategic e-business planning involves aligning investment in information technology with a company’s e-business vision and strategic goals such as reengineering business processes or gaining competitive advantages.

End User Involvement:End users are involved in the development of new or improved computer applications without the direct involvement of professional systems analysts.

End User Resistance:A new way of doing things – generates some resistance in the people affected. New systems may result in end user resistance. The key to minimizing end user resistance is to provide proper end user education and training, provide for good communications with IS professionals, and get the end users involved in the systems development and implementation.

Implementation:Implementation is dong what you planned to do. Implementation is a process that carries out the plans for changes in e-business strategies and applications that were developed in the planning process.

Implementing e-business Change:Implementing new e-business strategies requires managing the effects of major changes in key organizational dimensions such as business processes, organizational structures, managerial roles, employee work assignments, and stakeholder responsibilities that arise from the deployment of new e-business systems.

Information Technology Architecture:The IT architecture that is created by the strategic e-business planning process is a conceptual design, or blueprint, that includes the following major components: technology platform, data resources, application architecture, and IT organization.

Organizational Planning: Fundamental planning process consisting of (1) team building, modelling, and consensus, (2) evaluating what an organization has accomplished and the resources they have acquired, (3) analysing their business, economic, political, and societal environment, (4) anticipating and evaluating the impact of future developments, (5) building a shared vision and deciding on what goals they want to achieve, and (6) deciding what actions to take to achieve their goals. Planning for Competitive Advantage:Involves evaluation of the potential benefits and risks a company faces when using e-business strategies and technologies for competitive advantage. Models such as competitive forces, competitive strategies, value chain, and SWOT analysis can be used.

Scenario Approach to Planning:Teams of managers and other planners participate in exercises to simulate the real world.

SWOT Analysis:Model which is used to evaluate the impact that each possible strategic opportunity can have on a company and its use of information technology.

V. DISCUSSION QUESTIONS


Planning is a useless endeavor, because developments in e-business and e-commerce, and in the political, economic, and social environments are moving too quickly nowadays. Do you agree with this statement?

“Planning and budgeting processes are notorious for their rigidity and irrelevance to management action.” How can planning be made relevant to the challenges facing an e-business enterprise?

What planning methods would you use to develop e-business and e-commerce strategies and applications for your own business?

What are several e-business and e-commerce strategies and applications that should be developed and implemented by many companies today?

How can a company use change management to minimize the resistance and maximize the acceptance of changes in business and technology?

“Many companies plan really well, yet few translate strategy into action.” Do you think this is true?

What major business changes beyond e-business and e-commerce do you think most companies should be planning for the next ten years?

developing business/it strategies

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