STRATEGY PLANNING FOR INFORMATION SYSTEMS

1. STRATEGY PLANNING FOR INFORMATION SYSTEMS

2. Where IS Strategy Fits In The Wider Set Of Strategies • Identifying a business’ goals and objectives should lead to articulating an overall business strategy. • The model below shows where an IS strategy fits in context, {and not to make any statements about the sequence of the IS planning process}. In addition, since systemic relationships are an issue of perspective, the IS strategy shown here as an element of divisional strategy could equally be viewed as permeating across all divisions. The usefulness of viewing it in that way will largely depend upon the degree of autonomy within the divisions. • The single business strategy feeds down through divisional or business unit strategies into a number of ‘functional’ strategies. On of these is the IS strategy that, in turn, feeds into a number of sub-strategies, the IT strategy, the communications strategy, etc. These then develop ever more detailed strategy elements

3. TOP-DOWN OR BOTTOM UP • The figure shows the system hierarchy but it does not imply a fixed sequence. • Indeed, many organizations make early attempts at developing an IS strategy before articulating their business strategies, despite the fact that many IS strategy development approaches depend upon the prior identification of business strategies. • During early experiments with in IS strategy planning, IS often acts as the catalyst for generating and documenting the business strategy. Because the system strategies has a hierarchy it would be tempting to assume that strategy planning must be a top-down activity; this is not the case.

4. Corporate level Business strategy Competitive environment Business unit level Divisional Strategy Divisional Strategy Divisional Strategy Functional level Production Strategy IS Strategy Marketing Strategy Etc. IT Strategy Manual Systems Strategy Communications strategy increasingly specific Technology environment Software Strategy Hardware Strategy Data Strategy Voice Strategy Planning Strategy Staffing Strategy Policy guidelines and implementation decisions HIERARCHY OF STRATEGIES

5. Impact of information technology and systems Corporate (business) strategies Information systems strategies Relationships Between IT, IS and Business Strategies

6. Circumstances that Demand & Motivate Major Re-assessment of IS Strategic Plans • IS strategic planning, like any planning is not a one-off activity; ideally, it would be a continuous cycle synchronized with or, better yet, embedded into the cycle of general business planning. • Short-term elements of the plan will naturally require frequent revision to reflect technological changes. • The re-assessment referred to here is the long-term elements that provide the sense of direction; the what of the plan (short-term elements provide the how of the plan). • Three common elements that alter the objectives of an IS plan are: • Major corporate changes • External opportunities/threats • Evolutionary change

7. Major corporate changes • When there is a major corporate change, the collective result of new owners, management, rationalization programs, restructuring exercises or other corporate changes is an alteration in the real or perceived role of IS in matching the new needs of the business. • There is now a different business that needs different things from IS. If there obvious symptoms are present, then the IS strategy is likely to have its primary objective the definition of the new role for IS. Its scope will be uncertain but the emphasis is to build upon senior management commitment to the changing role of IS within the new organization.

8. External opportunities/threats • The likely symptoms of this type of change are the emergence of new markets and / or products that may be created by IS or the competitive need for major cost factor changes and improved performance. • This need may be generated by IS itself, or the awareness of new challenges and advantages emerging, and yet again opportunities / threats may be driven by IS. This set of circumstances is likely to produce a plan whose objective is to move IS resources, in the widest sense of the term into the new, but long-term, commitments to high benefit or threat protection • This plan focuses effort and resources upon those areas where the most good can be achieved. The emphasis of the plan is to exploit IS strengths and the weaknesses of competitors by being entrepreneurial and developing new attitudes, skills and uses of IS in these new commitments

9. Evolutionary change • This is the most frequent reason for re-assessing the IS strategy as IS itself keeps experiencing evolutionary change. • The emphasis is upon setting and resetting resource levels and styles and releasing or controlling IS in the appropriate way for the stage of growth

10. Contents of IS Strategic Plan • The content of a given organization’s strategic plan depends on particular org. emphasis. • The Plan is a conception of the future and therefore aims to achieve two things: • Clearly identify where IS intends to go and so avoid the danger of ‘getting lost’, i.e. taking courses of action that do not contribute to the overall mission • Provide a formalized set of benchmarks so that progress on this journey can be monitored • Being strategic, the plan should naturally contain long-term directions which would normally be for three to five years; this will mean that most of the document will need review every year, or at most eighteen months.

11. Contents of IS Strategic Plan • Despite the possible variety of formats, it is possible to identify the necessary core elements to the strategy plan; they are: • A clear statement of the IS objectives, that gives a clear sense of direction, i.e., where the organization wishes to be. • An inventory and assessment of both the current organizational capabilities and problems resulting from current practices, i.e. where the organization is now • A concrete implementation plan that translates the sense of direction and knowledge of the start point into a navigable route map, i.e. how to get from (1) to (2). The plan must identify both long-term and short-term actions and resource allocations. Additionally, the IS strategic plan must acknowledge that organizational change is almost inevitable corollary to the planning process

12. Contents of IS Strategic Plan • A ‘good’ plan must, result from ‘good’ planning and therefore it will document the mission, goals, objectives and acceptable strategies that were defined as part of the planning process.

13. Contents of IS Strategic Plan • Ward, in his model of planning process suggests that the IS plan should contain three elements: • Business Information Strategy; this indicates how information will be used to support the business. Priorities for systems developments are defined at a general level, perhaps by suggesting a portfolio of current and required systems. It may outline information requirements via blueprints for application developments of the future • IS Functionality Strategy; this indicates what features and performance the organization will need from the systems. It demonstrates how the resources will be used, and provides policy guidelines for the information resource’s management and perhaps policies for communication networks, hardware architectures, software infrastructures and management issues such as security, development approaches, organization and allocation of responsibility. • IS/IT Strategy; this defines the policies for software and hardware, for example any standards to be used and any stand on preferred suppliers. This also defines the organization’s stand on the IS organization, for example whether it is to be centralized or distributed, what are to be the investment, vendor and human impact policies and IS accounting techniques. • [Ward, J. 91987) Integrating Information Systems into Business Strategies, Long Range Planning, Vol. 20 No. 3 pp. 19-20]

14. The Information Systems Planning ’Toolkit’ • Here we cover many tools; some of these tools have as their emphasis the identification of the Strategic Management Information Systems (SMIS) whilst others focus comprehensive coverage of systems to deliver information requirements. • Some tools offer only placement advice, while others indicate preferred alternatives. • Some models raise levels of awareness when used without quantification and yet when ‘pinned down’ with more details will offer positioning support. • There is no one agreed way of grouping them.

15. SWOT – I.S. LEVEL • An assessment of opportunities and threats (opportunities in reverse) forms part of an environment scan whilst an assessment of strengths and weaknesses is part of the capability auditing of the organization. SWOT approach allows the consideration of: • What are our weak / strong products, divisions, attitudes, etc.? • Are there gaps / opportunities we can go for? • Are there dangers / threats we need protection from? • Are we strong in the right way to exploit the opportunity?

16. SWOT – I.S. LEVEL • The point of performing the analysis is that no business should take on a high-risk strategy, i.e. to exploit an opportunity, if they have a significant weakness in that area. • For example, assessing the SW of an organization means questioning: • Approach to IS. Whether IS is seen as a necessary evil, a scarce resource or as a transferring aid and whether the organization seeks to lead the field, follow the flock or float with the tide. • Use of IS. The number of systems which are of poor quality or not easy to use and those which are batch rather than on-line. And the proportion of systems which are administrative or ‘head office’ in nature rather than assisting the delivery of products or services.

17. SWOT – I.S. LEVEL • Delivery of IS. The proportion of resources tied in maintenance, the extent to which the current approach towards planning new systems is technology driven rather than information-need driven, the role of users and departments, the use of fourth generation tools and the use of modern system development techniques. • Data Management. The degree of redundancy and dis-aggregation of data, the use of DBMS and the approach to modelling and design of data. • Technical skills. The technical support available, the growth in demand and the responsibilities for voice communication, office systems and performance monitoring.

18. SWOT – I.S. LEVEL • NB • It is important to consider the impact of a possible course of action upon customers / suppliers as well as competitors since a strategy can be selected in isolation but it cannot be implemented in isolation. • A SWOT analysis is a reminder of the need for balance and an attempt to fudge the options available. So having become aware of the potential effect of IS we can use SWOT techniques to weigh the risks involved. • The figure below illustrates the four types of risk exposure created by the combinations of external and internal factors and indicates the type of response that might be most appropriate to deal with each type of risk. WE would expect IS priorities along a diagonal top-left to right-bottom since that line represents the best chance and the greatest dangers

19. Attack Beware ‘go for it’ ‘don’t do it’ Explore Protect ‘if have time’ ‘watch yourself’ Opportunity Situation IS faces Threat Strengths Weaknesses Evaluation of IS capabilities Possible responses on basis of SWOT Analysis

20. Sector Analysis • This is essentially the checklist style approach. The aim is, as with SWOT analysis, to make judgements in a structured way. • Size The current situation, in terms of a SWOT and competitive forces analysis.Pressures The external pressures on the industry in which the organization operates. This could come from a change in the competitive forces (for example a new entrant) or from a change in the attitude of customers or society at large. • Trends Identifying the trends is an element of creative business thinking since the organization must predict what changes the pressures will induce in the business. For example, lower profit margins, more direct competition, lower demand for a traditional product, rejection of certain materials, etc. • IS Needs What need and opportunities for IS will arise in the new situation? Can IS respond, by differentiating the product, or by making the process more efficient? • IS Markets Do the changes give the organization a chance to sell information of special IS?

21. Sector Analysis • In a sector analysis, the organization is asking: • Where are we now? • How is the world changing and what will be the new rules of the game? • What is the way to win and where do we want to be? • How can IS help our people? • How can our IS help other people?

22. KIT FOR ASSESSING BUSINESS OPPORTUNITY • These tools range from mere categorization to matrices used for analysis. The most common ones are as follows: • OPPORTUNITY CATEGORIZING • This categorizes opportunities according to the following categories: • Where the opportunity is to use technology-based systems to link the organization to its customers/consumers and/or suppliers. • Where the opportunity is to use technology-based systems to make more effective the integrative use of information in the organization’s value adding process. • Where the opportunity is for an organization to develop, produce, market and deliver new or enhanced products or services based on information. • Where the opportunity is to provide executive management with information to support the development and implementation of strategies.

23. IMPACT CATEGORIZING • Impact categorization is best answered by the following two questions: • Can IS be used to make a significant change in the way organization does business and so gain a competitive advantage? • Should it concentrate on using IS to improve its approach to market, or should it centre its efforts around internal improvements? • A FOUR potential business impacts Grid is used to widen and sharpen the focus of management attention.

24. Four Potential Business Impacts of IS Market Place (External) Approach to Operations (Internal) Improve Ways Alter Ways Strategic Opportunity Offered by IS

25. This model recognizes that IS efforts can be directed to operations and achieve strategic results. It’s usually at the cost of current business practices. • Silk(1991) proposed a different approach in which we use the basic principle that management directs resources to achieve results. Silk proposed three generic classes of Impacts thus; efficiency, effectiveness and competitive advantage. • An efficiency impact is felt where IS has made savings on other resources. • An effectiveness impact would occur when IS makes other resources more effective, i.e. IS allows organization to do a better job than before. This improves return on assets • Strategic advantage is felt when IS has changed some aspect of what the business does. This results in growth in terms of revenue or profit.

26. EFFICIENCY EFFECTIVENESS STRATEGIC ADVANTAGE COST SAVING HIGHER Return on Assets Business Growth Generic Impacts of IS/IT

27. STRATEGIC IMPORTANCE ANALYSIS • Derived from the Boston Consulting Group (BCG) Matrix discussed earlier, the Strategic Importance Matrix from McFarlan and McKenney (1983) classifies businesses, divisions, or products according to presently held market share and the future growth potential of that market. • The IS-specific matrix offered by McFarlan and McKenney is illustrated below and separates businesses by virtue of the different degree to which the firm is functionally dependent upon IS/IT today or the degree to which IS/IT developments will create competitive edge. • Similar systems can also be positioned with respect to the importance they hold to the business under review. • To what extent are the existing systems critical? • To what extent will they be in the future?

28. Strategic Importance of Planned IS High Low Low High Strategic Importance of Current IS STRATEGIC IMPORTANCE MATRIX Turnaround Strategic Support Factory Strategic Importance Matrix

29. STRATEGIC IMPORTANCE ANALYSIS • The strategic importance matrix can be used as described above to name the type of importance that IS collectively has for this business. By identifying the type of importance, advice on the style of management treatment of IS is given

30. BENEFIT LEVEL MATRIX • This is a nine segment matrix which shows who the effect is on as well as the nature of the importance. It also captures the dynamic nature of IS. • This model uses the same concepts as the competitive impacts analysis by Silk(1991) in that it differentiates between efficiency, effectiveness, and competitive edge effects.

31. Strategic Organizational Level at which benefit is felt Tactical Operational Efficiency Effectiveness Edge BENEFIT LEVEL MATRIX OA EIS 7 8 9 OA DSS MIS IKBS 4 CS 5 6 OA TPS EDI SMIS 1 2 Generic business benefit

32. Tools for analyzing Competitive Position • Here we consider some tools used to model nature, structure and responses to competition. • The Benjamin et al Impacts Model and the Strategic Importance Model by silk(1991) discussed earlier are adapted for analyzing competitive position. • Gregory Parsons (1983) was one of the first writers to suggest that the strategic importance of IS could be assessed within the frameworks defined by Porter’s works ie Five Forces Model and Generic Business Strategies. • Here we expand on these models

33. Industry analysis • The Benjamin et al Impacts Model is used but with an altered emphasis. Instead of asking “How Has IS Affected”, we ask “How Can IS Affect” It analyzes the future as opposed to the past effects or current situation. • Strategic Importance Model by silk(1991), is used for analysis by considering how IS could contribute to the competitive opportunities surrounding: • Products And Services • Markets • Economies Of Production

34. Five Forces model • Porter’s model was developed in 1985 and operates at an individual organization level. • It mainly emphasises on opportunities. • The diagram below shows its application.

35. Can IS build barriers to entry? Can IS change the balance of power with suppliers? Can IS change the basis of competition? Can IS build in switching costs? Can IS generate new products or services? Porter’s Five Forces Model and IS opportunities

36. Five Forces model • This model, developed by Porter and Millar (1985), operates at the level of an individual organization rather than at the industry level. • This model of competitive forces can be used to assess whether IS can influence the relative power of the five forces, those forces that affect an organization’s overall profitability. • This model is applied in a two-stage process: first to assess the most significant of the five forces and secondly to question what IS opportunities relate to those significant forces, including what opportunities exist to alter the relative power of the forces. • A ‘good’ business or IS strategy would enable the balance of power in supplier relationships in favour of the firm, increase switching costs for customers and change the basis of competition among rivals in favour of the organization.

37. Generic business strategies • This has three generic strategies and for IS, the objectives would be a shown here below: • Overall Cost Leadership: where the objective is to become the low cost producer in all market segments, and therefore where IS seeks to: • Reduce overall costs directly • Enhance the ability to reduce costs through other functions • Overall Differentiation: the objective is to distinguish the organization’s products and services from others in all market segments, and therefore where IS seeks to: • Add unique features to product/service directly • Enhance the ability to differentiate the product/services through other functions. • Focus/Niche: the objective is to concentrate upon a particular market segment and then either differentiate or have cost leadership in that segment, and therefore where IS seeks to: • Identify and create market niches directly • Enhance the ability to create market niches through other functions.

38. Strategic thrusts • Rackoff, Wiseman and Ullrich(1985) expanded on Porter’s work on competitive strategies to offer a more comprehensive model of industry competition. • They called the model “Strategic Option Generator Model”. • It identifies 5 things that an organization can do and 3 targets that those things can be applied to. • The grid can be filled from an IS Perspective.

39. Strategic thrusts

40. This optional grid can be ‘filed in’ by asking a number of questions which include: • What is our strategic target? Suppliers Customers Competitors • What strategic Thrust can be used against the target? Differentiation Cost Innovation Growth Alliance • What strategic mode can be used? Offensive Defensive • What direction of thrust can be used? Usage Provision • What skills can be we use? Processing Storage Transmission

41. Strategic set transformation • King (1978)suggests that if the business strategy is viewed as an information set of managerial variables, [such as a mission, objectives, strategies, willingness to accept change, important constraints, etc.,] then strategic IS planning is the process of turning this business organizational set into the IS strategy set [comprising the IS objectives, strategies and constraints]. • Technique starts by defining business strategy set. • The strategy set must be validated by the getting comments and approval from the senior management. This then, is the business strategy set that can now be ‘transformed’. • To do this, each element of the strategy set is taken and an IS equivalent identified. These are then collected as the IS strategy set. • This shapes the overall infrastructure architecture and the business strategy. • King (1978) [Strategic Planning for management Information Systems, MIS Quarterly, Vol. 2 No. 1 Mar. pp. 22-37]

42. Business Strategy Set IS Strategy Set Mission Objectives Strategy Other strategic organizational attributes IS Strategic System objectives System Constraints System design Strategies Planning Process Strategic set transformation

43. EVOLUTIONARY MODEL • Stages of growth Model • First observed and recorded in 1974 by Richard Nolan and Cyrus Gibson, as a way of understanding the developing sophistication of IS use and management; this has subsequently presented enhancements upon the basic model via a number of new versions. • In the stages of growth models the basic premise is that any organization will move through stages of maturity with respect to the use and management of IS.

44. Stages of growth Model • Stage 1: The technology is introduced in the organization • Stage 2: This is a period of rapid and uncontrolled growth in the number and variety of applications of the particular technology • Stage 3: Management now gains control over the technology’s resources by implementing formal control processes and standards that stifle almost all new projects • Stage 4: The use of the new technology increase rapidly providing new benefits and supporting the overall business strategy • Stage 5: The data handled by the new technology are recognized as an important resource and so efforts are made to manage the data • Stage 6: Maturity – perfection?

45. Stages of growth Model • It was found that many other aspects of IS use and management also changed over time and so more stages were added and they were described in ever more complex ways to include: • The role of users • The spread of automation across applications • The organization of the DP’s management • The type of planning controls used • Versions of the Stages of Growth Model (the model is also known as the MIS Maturity Continuum) were developed with subsequent enhancements made to adapt to modern IS life • The stages of Growth Model gives a better understanding of the factors influencing the strategy and so management are able to do a more successful job of planning. • The management principles will differ from one stage to another and different technologies and perhaps different areas of the organization are in differing stages at any one time.

46. Stages of growth Model Stages of Growth Model – Four Stages

47. Stages of growth Model • At each stage, organizational changes occur. This process involves a growth in computer applications, specialist personnel and specifically IS management techniques. • The latter model of the stages of growth suggests that the ‘maturity’ can be sub-divide into three, more specific, stages. This is an enhancement and not a replacement of the earlier model. The names also change a bit.

48. Stages of growth Model

49. Stages of growth Model Stages of growth Model – six stages

50. Additional Toolkits • READ AND MAKE NOTES ON THE FOLLOWING: • INFORMATION REQUIREMENTS ANALYSIS • CRITICAL SUCCESS FACTOR ANALYSIS • CRITICAL SET ANALYSIS • ENDS-MEANS ANALYSIS • Business System Planning • INDUSTRY LIFE CYCLE