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