Information Systems Planning - Lecture 19

Information Systems Planning Lecture 19Summary of Previous Lecture Strategic uses of IT, Historical overviewWhither the internet revolution?Cheap RevolutionProfitability of IT revolutionGRAINGER Case StudyDefinitions review E-Business DriversDoes IT Still Matter? Nicholas Carr Summary of Previous LectureHow IT still mattersWorking inwardWorking outwardWorking AcrossWorking InwardB2E, IntranetIntranet ApplicationsGeneral Electric Case StudySummary of Previous LectureFostering a sense of belongingWorking OutwardB2CElectronic TendersGetting closer to customersAmazon.com web exampleProblems and Advantages of Working outwardThe E-Business ModelSummary of Previous LectureWorking AcrossB2B modelCoordinating with co-suppliersLevels of system integrationWhat is a Value chain?DELL Computer case ExampleToday’s LectureIntroductionTypes of planningWhy is planning so difficult?The Changing World of PlanningTraditional Strategy-MakingToday’s Sense-and-Respond ApproachToday’s Lecture cont.Seven Planning TechniquesStages of GrowthCritical Success FactorsCompetitive Forces ModelFive Forces Analysis of the InternetValue Chain AnalysisE-Business Value MatrixLinkage Analysis PlanningScenario PlanningIntroductionIS management is becoming more difficult and more important at the same time:Technology changing so fast: “Why bother?” Vs. Most organizations’ survival is dependant on technologyHow to resolve this apparent paradox?Good News = variety of approaches, tools and mechanisms availableBad News = no ‘best’ way to go about itIntroductionIntroduction cont.It is important to establish the appropriate mindset for planning:Some managers believe = “determining what decisions to make in the future”Better view = developing a view of the future that guides decision making todaySubtle difference = ‘strategy making’Strategy = stating the direction in which you want to go and how you intend to get thereThe result of strategy-making is a planWhy Planning Is So DifficultTypes of Planning:Planning is usually defined in three forms, which correspond to the three planning ‘horizons’. (Figure 4-1)Strategic = 3-5 yearsTactical = 1-2 yearsOperational 6 months – 1 yearTypes of PlanningIntroduction cont.Why Planning Is So Difficult?:Business Goals and Systems Plans Need to AlignStrategic systems plans need to align with business goals and support those objectivesFortunately = trend for CIOs to be part of senior managementTechnologies Are Rapidly ChangingHow can you plan when information technologies are changing so rapidlyContinuous planning?Old days of planning at ‘start of year’ = goneAdvanced technology groups are needed for planning.Introduction cont.Why Planning Is So Difficult cont.:Companies Need Portfolios Rather Than Projects Evaluation on more than their individual meritHow they fit into other projects and how they balance the portfolio of projectsInfrastructure Development is Difficult to FundDespite everyone “knowing infrastructure development is crucial”, it is extremely difficult to get funding just to develop or improve infrastructureOften done under the sponsorship of a large application projectChallenge = develop improved applications and improve infrastructure over time Introduction cont.Responsibility Needs to be JointBusiness planning, not just a technology issueOther planning issuesTop-down Vs. bottom-up; radical change Vs. continuousPlanning cultureCOME QUICK! I have nowhere to put my yearly planner!IT Planning is not like This one!The Changing World of Planning Internet etc. = ‘introduced’ speed into the business environment and transformed how people think about time, how much time they have to plan, react to competitors etc.Traditional Strategy-Making:Business executives created a strategic business plan = where the business wanted to goIS executives created an IS strategic plan = how IT would support the business planIT implementation plan created = describe exactly how the IS strategic plan would be implementedThe Changing World of PlanningAssumptions:The future can be predictedTime is available to do these 3 partsIS supports and follows the businessTop management knows best (broadest view of firm)Company = like an ‘Army’The Changing World of PlanningThe Changing World of Planning cont.Today, due to the Internet and other technological advances, these assumptions no longer hold true:The future cannot be predictedWho predicted Internet, Amazon, eBay etc.?Time is not available for the sequenceIS does not JUST support the business anymoreFigure 2-8Top management may not know bestInside out Vs. outside in approach (Figure 4-3)An organization is not like an armyIndustrial era metaphor no longer always appliesToday’s Sense-and-Response ApproachIf yesterday’s assumptions no longer hold true, what is taking the ‘old’ approach’s place?:Let Strategies Unfold Rather Than Plan Them:In times of fast paced change (like today!) this is risky When predictions are ‘risky’, the way to move into the future is step by step using a sense-and-respond approachSense a new opportunity and immediately respond via testing it via an experimentMyriad of small experiments (Figure 4-6)Today’s Sense-and-Response ApproachFormulate strategy closest to the action:Close contact with the marketEmployees who interact daily with customers, suppliers and partnersEmployees who are closest to the future should become prime strategists. In the ‘Internet Age’ they are often younger employees The Changing World of Planning Abandoned proprietary network despite big $ when it did not capture enough customersMoved on to buying Internet Companies as well as aligning with Sun to promote JavaOver time = moved into a variety of technologies:Web, Cable news, Digital movies, Cable modems, Handheld OS, Video server, Music, Multiplayer gamingNot all came from ‘top management’ Getting its fingers into every pie that might become importantMICROSOFTCase example: Sense and Respond Strategy-MakingDifferent Microsoft Products’s Sense-and-Response Approach cont. If yesterday’s assumptions no longer hold true, what is taking the ‘old’ approach’s place?Guide Strategy-Making with a ‘Strategic Envelope’:Having a myriad of potential corporate strategies being tested in parallel could lead to anarchy without a central guiding mechanismTop management set the parameters for the experiments (= a ‘strategic envelope’), and then continually manage that contextNeed to meet often to discuss:Shifts in the marketplaceHow well each of the experiments is proceedingNew GM believed change would only occur if he went directly to his ‘front lines’ (gas station employees). Set aside 50% of his timeGoal = not to drive strategy from ‘Corporate’ (tried and failed dismally) but to interact directly with the grass roots and support their initiativesTechnique = use of action labs (6 to 8 people):Week long retailing ‘boot camp’, peer challenges, ‘hot seats’, 60 day plan implementations, report back etc.Projects yielded many more projectsGuidance and encouragement came from the top, so that there was not complete chaosSHELL OILCase example: Guide Strategy-Making with a ‘Strategic Envelope’SHELL OIL Web PortalNow utilizing Social MediaToday’s Sense-and-Response Approach cont. If yesterday’s assumptions no longer hold true, what is taking the ‘old’ approach’s place? cont.:Be at the Table :IS executives have not always been involved in business strategisingThis situation is untenable in today’s ‘Internet-driven’ world.Note: first = need to make IS department credibleTest the FutureNeed to test potential futures before the business is ready for them (thinking ahead of the business)Provide funding for experimentsHave an emerging technologies groupToday’s Sense-and-Response Approach cont. If yesterday’s assumptions no longer hold true, what is taking the ‘old’ approach’s place? cont.:Put the Infrastructure in Place:Moving quickly in Internet commerce means having the right IT infrastructure in place..Recommended that IT ‘experiments’ include those that test ‘painful’ infrastructure issues such as how to:Create and maintain common, consistent data definitionsCreate and encourage mobile commercial standards among handheld devicesImplement e-commerce security and privacy measuresDetermine operational platforms (ERP, Supply Chain Management )Seven Planning TechniquesStages of GrowthCritical Success FactorsCompetitive Forces Model Value Chain AnalysisE-business Value MatrixLinkage Analysis PlanningScenario PlanningStages of Growth1. Stages of GrowthStage One: Early Successes: Increased interest and experimentationStage Two: Contagion: Interest grows rapidly; learning period for the fieldStage Three: Control: Efforts begun toward standardizationStage Four: Integration: Pattern is repeatedExample (Figure 4-5):DP Era 1960 – early ’80sMicro era early ’80s – late ’90sNetwork era late’90s – 2010..1. Stages of Growth cont.The eras overlap each other slightly at points of “technology discontinuity”Proponents of the proven old dominant design struggle with proponents of the new and unproven designs‘Inevitably’ the new (proven) win outImportance of the theory is understanding where a technology or company resides on the organizational learning curvee.g. too much control at the learning and experimentation stage can kill of new uses of technologyManagement principles differ from stage to stageDifferent technologies are in different stages at any point in time Critical Success Factors2. Critical Success FactorsPopular planning approach that can be used to help companies identify information systems they need to develop / improveFor each executive, CSFs are the few key areas of the job where things must go right for the organization to flourishTime dependent (must be re-examined)Four sources: industry the business is in, company itself and situation within industry, environment (consumer trends), and temporal organizational factors (inventory)2. Critical Success Factors cont.Used to determine factors critical to accomplish corporate objectives and corresponding measuresCan be used to identify IS plans that need to be developedCompetitive Forces Model3. Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6):Threat of new entrantsBargaining power of customers and buyersBargaining power of suppliersSubstitute products or servicesThe intensity of rivalry among competitors3. Competitive Forces Model cont.Three strategies for dealing with these competitive forces:Differentiate product and services - make them “better” in the eyes of the consumerBe the lowest-cost producer - not just a low-cost producerFind a niche - e.g.: geographical marketThe Internet tends to reduce the profitability of industries and reduce firms’ ability to create sustainable operational advantages because:It increases the bargaining power of buyersDecreases barriers to the entry of new competitorIncreases the bargaining power of suppliersIncreases the threat of substitute products and services, and Intensifies rivalry among competitorsRecommend = focus on your strategic position in an industry and how you will maintain profitability Not growth, market share or revenueFramework ExampleFive Forces Analysis of the InternetValue Chain Analysis4. Value Chain AnalysisFive primary activities that form the sequence of the value chain:Inbound logistics: receiving and handling inputsOperations: converting inputs to the product/serviceOutbound logistics: collect, store, and distribute the product/service to buyersMarketing and sales: the means/incentives for buyers to buy the product/serviceService: enhancements/maintenance of the value of the product/service4. Value Chain Analysis cont.Four supporting activities that underlie the entire value chain:Organizational infrastructureHuman resources managementTechnology developmentProcurementVirtual Value ChainsMarketspaces where information substitutes for physicalAN AUTOMOBILE MANUFACTURERCase Example – Virtual Value ChainThe rental car subsidiary turned to auctioning off clean used cars to dealers to sell, via marketspace Dealers can view the cars (and their stats) to be auctioned from a screen in their dealership, and then place bids during the online auction, held once or twice a monthThe auction saves them time and effort, and the cars are guaranteedE-Business Value MatrixIt can be difficult for executives to prioritise projects, therefore a ‘portfolio’ management approach is valuable. Tool used by “Cisco Systems” to ensure they are developing a well-rounded portfolio of IT projects.5. E-Business Value Matrix5. E-Business Value MatrixEvery IT project is meant to be placed into one of four categories to assess its value to the company (Figure 4-8):New fundamentals: Low, Low is to provide a fundamentally new way of working in overhead areas, not business-critical areasOperational excellence: High in criticality to business-Low in newness of idea=medium risk because they may involve reengineering work processesRational experimentation: Low in criticality to business-High in newness of idea=test new technologies and ideasBreakthrough strategy: High-High=potentially have a huge impact on the companyCISCO SYSTEMSCase Example – E-Business Value MatrixCisco’s expense reporting system fits in its new fundamentals categoryIts executive dashboards are an example of operational excellence projectsMulticast streaming video used for company meetings is a rational experiment, and Its development of a virtual supply chain is seen as a breakthrough strategyCISCO Expense Reporting System ExampleCISCO Executive Dashboard SystemCISCO SYSTEMS WebsiteLinkage Analysis Planning6. Linkage Analysis PlanningExamines the links organizations have with one another with the goal of creating a strategy for utilizing electronic channelsMethodology includes the following steps:Define power relationships among the various players and stakeholders:Identify who has the powerDetermine future threats and opportunities for the company6. Linkage Analysis Planning cont.Map out your extended enterprise (Figure 4-9) to include suppliers, buyers, and strategic partnersThe enterprise’s success depends on the relationships among everyone involvedSome 70% of the final cost of goods and services is in their information content6. Linkage Analysis Planning cont.Plan your electronic channels to deliver the information component of products and servicesCreate, distribute, and present information and knowledge as part of a product or service or as an supplementary goodScenario Planning7. Scenario PlanningScenarios are stories about the way the world might be in the futureThe goal of scenario planning is not to predict the future (= hard to do!), but to explore the forces that could cause different futures to take placeThen decide on actions to take if those forces begin to materialize 7. Scenario Planning cont.Long-term planning has traditionally extrapolated from the past and has not factored in low-probability events that could significantly alter trendsStraight-line projections have provided little help! Four steps in Scenario Planning:Define a decision problem and time frame to bound the analysisIdentify the major known trends that will affect the decision problemIdentify just a few driving uncertaintiesConstruct the scenarios SummaryBased on the successes and failures of past information systems planning efforts, we see two necessary ingredients to a good strategic planning effort:IS plans must look towards the futureFuture is not likely to be an extrapolation of the pastSuccessful planning needs to support “peering into the future” – most likely in a sense-and-respond fashionIS planning must be essential to business planningSummaryIS plans typically use a combination of planning techniques presentedNo single technique is best and no single one is the most widely used in businessSense-and-respond is the new strategy-making modeCreating an overall strategic envelope and conducting short experiments within that envelope, moving quickly to broaden an experiment that proves successfulPlanning is “Peering into an unknown future”