Week 3 Monday, February 6

1. Week 3Monday, February 6 Strategic Alignment Business Networks

2. Strategic Alignment • Alignment between the business and IT strategies • Alignment between strategy and capabilities Business IT Strategy Strategy Value • IT infrastructure • Technology IT infrastructure • Human IT infrastructure Capabilities Capabilities Including infrastructure Including infrastructure

3. Porter’s Five Forces ModelForces that Shape Strategy  How will the business react to threats (and opportunities)? Potential Entrants Threat of new entrants Industry Competitors Bargaining power of suppliers Bargaining power of buyers Customers and Buyers Suppliers    Rivalry among existing firms Threat of substitute products or services  Substitutes

4. Strategy and Threats Opportunities Threats Strategy How does the business capitalize on its threats?

5. Strategic Information Systems Planning (SISP) • Definition... a process conducted within the contexts of scope, perspective, time frame, and level of abstraction, with any or all of the following agenda: (1) supporting and influencing the strategic direction of the firm through identification of value-adding computerized information systems, (2) integrating and coordinating various organizational technologies through development of holistic information architectures, and (3) developing general strategies for successful systems implementation.Segars, Grover and Teng.1998

6. SISP Progression Alignment of IS strategy with corporate strategy Enabling initiatives for gaining competitive advantage Architectures for sharing organizational and interorganizational data and integration technologies IS viewed as strategic resource

7. Context Characteristics of SISP Scope (broad) Strategic Information Systems Planning Perspective (upper management) Time Frame (long range) • Supporting and influencing the strategic direction of the firm through identification of value-adding computerized information systems • Integrating and coordinating various organizational technologies through development of holistic information architectures • Developing general strategies for successful systems development Level of Abstraction (conceptual)

8. Six Process Dimensions Comprehensiveness Formalization Focus Planning Effectiveness Coalignment* Flow Participation Favorable coalignment will lead to effective planning Consistency *Alignment of dimensions

9. 1. Comprehensiveness • Thoroughly canvassing a wide range of alternatives • Surveying a full range of objectives • Carefully weighing the costs and risks of various consequences • Intensively searching for information to evaluate alternative actions • Objectively evaluating information or expert judgment regarding alternative actions • Re-examining the positive and negative consequences of all known alternatives • Making detailed plans, including consideration of contingencies, for implementing a chosen action

10. 2. Formalization • Existence of structures, techniques, written procedures and policies that guide the planning process • Written policies that structure the process of planning • Formalized techniques adopted for the purpose of conducting strategic planning • Known procedures for initiating the planning process • Processes systemize information collection and dissemination Formalization vs. Flexibility

11. 3. Focus • The balance between creativity and control orientations inherent within the strategic planning system Innovation vs. Integration • Innovative orientation nurtures creativity (innovative, novel solutions) • Integrative orientation focuses more on control (budgetary, cost performance, controlled diffusion of assets within the organization)

12. 4. Flow • Locus of authority or devolution of responsibilities for strategic planning • Roles played by corporate and divisional managers in the initiation of the planning process (vertical orientation) Top-down vs. Bottom-up • Top-down: limited participation of lower level managers in the initiation of the strategic planning process • Bottom-up: functional management involvement in the initiation of strategic planning

13. 5. Participation • Breadth of organizational involvement in strategic planning • Representation from the functional areas Narrow vs. Broad • Narrow: fosters an isolated approach to plan formulation with little involvement or interaction among various functional or operational managers • Broad: a variety of functional and operational areas help offset “bounded rationality” of top managers

14. 6. Consistency • Concerned with the frequency of planning activities or cycles, and evaluation /revision of strategic choices Frequent vs. Infrequent • Infrequent: time frame longer, face-to-face meetings tend to be ad hoc or sporadic, planning cycles may be year-to-year (vs. continuous or consistent process) • Frequent high levels on consistency characterized by continuous planning process with frequent meetings, constant communication among planning participants, and frequent assessment and revision of strategic direction

15. Proposition • Strategic IS planning systems that reflect a profile of rational adaptation will be positively associated with planning effectiveness. The structure or internal coalignment of a rational adaptive planning system includes: • higher levels of comprehensiveness • higher levels of formalization • a focus on control vs. creativity • a top-down vs. bottom-up planning flow • higher levels of participation • higher levels on consistency Segars, Grover and Teng.1998

16. Coalignment • Coalignment strongly associated with planning effectiveness • If dimensions of strategic planning systems favorably align, the planning system as a structure should be more successful than its individual dimensions • Effectiveness may be beyond performance measurement (e.g., ROI, ROE) • Alternative: value-added approach • Improved management making • Lower costs of development • Plans that are actionable and implemented

17. Internal Planning System Coalignment • The planning system should be structured process of opportunity search that “adapts” through consistent feedback and wide participation • Rational planning tendencies of extensive alternative generation and solution search, formalized procedures and policies for planning, a focus on control, and top-down planning flow • Adaptive tendencies of wide participation profiles and high levels of planning consistency Rational adaptation Planning effectiveness

18. Implications for Strategic IS Planning • Planning must be designed, evaluated, and refined such that the overall activity of planning does not become dysfunctional • Emergent systems of planning should reflect the environmental and organizational context within which they function

19. Source: “Strategic Information Systems Planning: Planning System Dimensions, Internal Coalignment and Implications for Planning Effectiveness,” Albert H. Segars, Varun Grover, and James T. Teng. Decision Sciences (journal), vol. 29, no. 2 (Spring 1998).

20. IT and Organizations Control Organizational Redesign

21. Control • Ensures the organization’s goal and objectives are met • Mechanisms for monitoring the differences between desired and actual performance (i.e., checks and balances) • Types of controls • Action controls – operational control level • Result controls – toward the strategic planning level • Personnel controls – Recruiting, hiring and retaining the right people with the right skills • Transaction controls – accurate and complete documentation of financial and legal transactions with regular review to ensure risk and asset management Design into the Organiza-tion

22. Longer tongue Longer bill Counterbalance weight Strengthened neck Larger wings Strengthen legs Ad Hoc Planning and Organizational Redesign Volume increases by its cube (v3), area by its square (a2) Duck Tongues: A Tale of Redesigning the Duck

23. Common ProblemsWith Organizational Redesign • Failure to redesign end-to-end processes • Failure to realign operations with other components of the organizational redesign Piece-meal approach Business cycle • Operating processes – activities that define how a firm designs, produces, distributes, markets, sells and supports its products and services • Management processes – activities that define strategic direction and coordinate and control operations

24. MIT90 FrameworkFive Inter-Related Components Organization and coordination Structure Vision and direction Information Technology Planning and control Strategy Management Processes Technology Individuals and Roles Human resources Dynamic Equilibrium: Any change to a component requires an adjustment to the others

25. MIT90 Framework • Strategy - pattern of missions, objectives, policies, and significant resource utilization plans stated in such a way as to define what business the company is in (or is to be in) and the kind of company it is or is to be. It defines • The product line, markets and market segments for which products are to be designed • The channels through which these markets will be reached • The means by which the operation is to be financed • The profit objectives • The size of the organization • The image which it will project to employees, suppliers and customers Bullen and Rockart, 1981

26. MIT90 Framework • Technology - encompasses all of the factors that directly enter into the transformation of organizational inputs into organizational outputs • Tools, equipment and machinery used in the transformation process • Technical procedures and systems Porras and Robertson (1990)

27. MIT90 Framework • Information Technology - “comprises those technologies engaged in the operation, collection, transport, retrieval, storage, access presentation, and transformation of information in all its forms”Boar (1997)

28. IT and the Organization Technology Push Competitive Pull • Cost performance trends • Connectivity capabilities Innovative IT-enabled applications to obtain differential benefits in the marketplace to stay competitive IT as a Strategic Resource Enhancing Productivity Leveraging IT

29. IT Application Framework Strategic Application of IT IT to differentiate the organization from others Reengineering Business Processes Basic IT to remain competitive in industry IT Infrastructure Basic IT to do business

30. MIT90 Framework • Management Processes - Ensure the orderly production of goods and services • Planning is the process of deciding on objectives, on changes in these objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use, and disposition of these resources. • Control is the process by which managers assure that • Resources are obtained and used effectively and efficiently in the accomplishment of the organization's objectives • Specific tasks are carried out effectively and efficiently Anthony (1965)

31. MIT90 Framework • Structure - organization and coordination • Communication • Authority • Workflow Leavit (1965)

32. MIT90 Framework • Individuals and Roles - people and skills necessary to utilize the technology • Designs of jobs required to use the technology • Technical expertise of organizational members Porras and Robertson (1990)

33. IT Infrastructure • Technology IT infrastructure – Hardware and software • Human IT infrastructure – People to make the IT work • Without the right people, an organization would not benefit from the most advanced IT

34. Influence of IT on Organizational Resign Structure Technology Successful Business Model Management Processes Strategy Individuals and Roles Strategy incorporates a vision of technology

35. Extending the Enterprise Role of IT in Integrating the Business

36. Processes Outputs Inputs What does it take to get groceries into a home?

37. Business Network Manufacturers Distributors Peapod Delivery Consumer How does IT provide a competitive advantage?

38. Business NetworksDifferentiation vs. Integration • Design of business network • Differentiation – defines how individuals, groups and organizations are subdivided into specialized work units • Horizontal, vertical and spatial networks • Integration – defines the relationships and links between units that are required to unite specialized individuals, units and organizations to enable them to achieve a common purpose and create shared value • Task-based relationships, information- or expertise-based relationships, or social relationships

39. Differentiation and Integration Strategic Vertical division Tactical Integration Power authority levels Information/expertise Networks Operational Task-based Social Horizontal division Specialization

40. Network Relationships • Required in environments characterized by increased complexity, uncertainty and turbulence, especially when the network contains a large number of highly differentiated nodes (units) that must work closely together to achieve a common goal • Environments that require • Innovative and creative thinking • Information sharing and decision making • Coordination and cooperation

41. Designing High-Performance Inter-Firm Business Networks • Decisions considering… • Network differentiation and unit groupings • Network integration and interdependencies • Network ownership

42. 1. Network Differentiation and Unit Groups • Capabilities and resources to execute strategy and achieve the business’ goals • Activities required to acquire these capabilities and resources • Grouping activities in specialized units to focus on developing the best in class capabilities, and efficiently and effectively achieving the goals

43. 2. Network Integration and Interdependencies • Managing specialized units internal or external to the organization • Organizational solutions to coordinate and control interdependencies among specialized units (in the network) • Alignment between business environment and strategy to enable network to achieve goals and create value

44. Interorganizational Governance Models • Market models – transaction based (exchange of goods and services for payment) • Hierarchical models – formal contracts and authority govern the activities to be performed, products or services to be provided, price to be paid, and length of the relationship • Partnerships – complex, uncertain and critical interdependencies to the success of the partners (businesses) Supply chain management

45. 3. Network Ownership • Within the corporation or organization • Alliance between two members (businesses) • Ecosystem – community of diverse members, each working together toward achieving a common goal (collaborative community) Pre-1980s 1980s and early 1990s (Unknown)

46. Hybrid Governance Models:Collaborative Communities • IT opens new opportunities for collaboration among businesses • Enable coordinating and controlling inter- and intra-firm interdependencies • Distinguishing features: • Shared purpose and values stress an ethic contribution • Organizational configurations and solutions support horizontal relationships (and vertical, authority-based and market-based relationships) • Development of interdependent form of identity that motivates and engages active participation and affiliation

47. Business Network Manufacturers Distributors Peapod Delivery Consumer How does IT provide a competitive advantage?