Developing Business/IT Strategies

Prof. Anatoly Sachenko

9

Developing Business/IT Strategies I. LECTURE OVERVIEW

Foundation 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 organization al 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 company’s e-business vision and strategic goals such as reengineerin g 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 company’s technology platform, 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. 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 plannin g and business models in the development of e-business e-business strategies, architectures, and applications. • Identify several several change management solutions for end user resistance to the implement ation of new e-business strategies and applications.

III. LECTURE NOTES Section I: Planning Fundamentals Fundamentals INTRODUCTION

e-business technology has created a major shift in the way companies 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 planni ng is the Analyzing The Rowe Cos. & Merrill Lynch: We can learn a lot about the business value of of various business/IT business/IT planning plannin g methodologies from this case. Take a few minutes to read it, and we will discuss it (See Rowe Rowe Cos. & Merrill Lynch in Section IX).

Prof. Anatoly Sachenko 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 thei r goals. • • • • • •

organizational pl anning annin g process is referred referred to as a plan. This plan formally articulates the Plan – the results of the organizational 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 plan ning process p rocess is followed followed by implementation, which is monitored by control measures, which provide feedback for for planning. plann ing. Strategic Planning - deals with the development development of an o rganization’s mission, goals, strategies, and policies. Corporations may begin the process by developing developing a shared vision using a variety of techniques, includin g 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 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 of scenarios of what might be happen ing, to what might happen ha ppen in the real world.

PLANNING FOR COMPETITIVE ADVANTAGE ADVANTAGE: [Figure 9.5]

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

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Competitive strategies model – cost, leadership, differentiation, growth, innovation, and alliances.

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

Prof. Anatoly Sachenko processes and prima ry business processes. processes. •

e-business opportunities, as Strategic opportunities matrix – evaluate the strategic potential of proposed e-business measured by their risk/payoff risk/payoff probabilities.

SWOT Analysis: Strengths, weaknesses, opportunities, and threats – SWOT is used to evaluate evaluate the impact that each possible strategic opportunity can have on a company and its use of information technology. 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 mar ket losses posed 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 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 m ake money. money. A business 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 th at value to our customer? How do we make money in this business? • • • •

A business model specifies: What value to offer customers, customers, and which customers to provide this value to using which products and services at what prices. How the business will will organize and operate to have the capability to provide this value and sustain any advantage from providing this value to its customers.

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A business business model is a valuable plan ning tool because because it focuses attention on how all the essential components of a business fit into a complete system. system. Done properly, properly, it forces entrepreneurs and man agers to think ri gorously and systematically systematically about the value and viability of the business initiatives they are planning. Then the str ategic plannin g 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, Processes, focuses on discovering in novative approaches to s atisfying atisfying a company’s company’s customer value and business value goals is referred referred to as e-business e-business planning. This planni ng process leads to development of strategies and business models for for new e-business and e-commerce platforms, processes, products, 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 e-business and IT strategies to meet its customer’s customer’s value and business value vision. This coadaptation process is necessary because information technologies are a fast changing, but vital component in all e business and e-commerce e-commerce activities. The e-business planning process has three major components: •

company’s e Strategy Development – Developing e-business and e-commerce strategies th at support a company’s business vision, use information technology to create innovative e-business systems systems that focus on customer and business value.

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

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

Information Technology Architecture Note to students that the IT architecture that is created by the strategic e-business planning p rocess is a conceptual design, or blueprint, that includes the following major components: •

Technology Platform: - The Internet, intranets, extranets, and other networks, computer systems, system Technology software, and integrated enterprise application software provide a computing and communications infrastructure, or platform that supports the strategic use of information tech nology for for e-business and ecommerce.

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Data Resources: Many types 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.

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Applications Portfolio: Business applications of information technology are designed as an integrated portfolio of information systems that support stra tegic e-business initiatives, as well as cross-functional cross-functional business p rocesses. rocesses. IT Organization: The organizational structure of the IS function within a company and the distribution of IS specialists is designed to meet the chan ging strategies stra tegies 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

Prof. Anatoly Sachenko planning process.

IDENTIFYNG e-BUSINESS STRATEGIES: [Figure 9.9]

A strategic positioning matrix ca n 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 Efficiency Improvements Performance Improvement i n Business Effectiveness Effectiveness Global Market Penetration Product and Service Transformation Transformation • • • •

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Cost and Efficiency Improvements This quadra nt represents a low amount of internal company, customer, customer, and competitor connectivity and use of IT via the Internet and other networks.

Strategy:

Focus on improving effici efficiency ency and lowering costs by using the Internet and the World Wide Wide Web as a fast, low-cost way to communicate and i nteract with customers, suppliers, a nd business partners.

Example: Example:

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

Performance Improvement in Business Effectiveness A 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. low.

Strategy:

Make major improvements in business effectiveness effectiveness..

Example: Example:

Widespre Widespread ad internal use use of of Internet-ba Internet-based sed technol technologie ogiess like Intranets can can substantiall substantially y improve improve information sharing and collaboration within the business and with its trading partners.

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

Strategy:

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

Prof. Anatoly Sachenko Example: Example:

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E-commerce E-commerce websit websites es with with value-ad value-added ded information information services services and extensive extensive online custom customer er support.

Product and Service Transformation A company company and its customers, suppliers, and competitors are extensively networked. 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: Strategy:

Develop Develop and deploy deploy new Internet-base Internet-based d products products and service servicess that strategicall strategically y repos reposition ition it in the marketplace.

Example: Example:

Use the Internet Internet for electr electronic onic commerc commercee transaction transaction processi processing ng with custo customers mers at company 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 development projects p rojects is evaluated by company executives 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. •

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e-business Architecture Planning e-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) 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 int erenterprise e-business processes among a company’s company’s customers, suppliers, and other business partners. •

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e-business and e-commerce component-based 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 company’s technology infrastructure, which includes al l 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 r apidly produce the strategic e-business applications needed by a company.

Section II: Implementing Challenges IMPLEMENTATION

Implementation is an important manageri al responsibility. responsibility. Implementation is doing what you 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, Verizon, F.X. Coughlin, and A-dec We can learn a lot from this case about the important implementation challenges that arise when implementing

Prof. Anatoly Sachenko new e-business strategies. Take Take a few minutes to read it, and we will discuss it (See Verizon, Verizon, F.X. Coughlin, a nd Adec in Section IX).

IMPLEMENTING INFORMATION INFORMATION TECHNOLOGY: [Figure 9.15]

Introducing e-business and other applications of information technology impact an organization. Major new ecommerce initiatives can enable a company to redefine its core lines of business and precipitate d ramatic changes within the entire interenterprise value chain of an e-business enterprise. Implementing new e-business strategies requires ma naging the t he effects effects of major changes in key organizational dimensions such as business processes, organizational st ructures, managerial roles, employee employee work assignments, and stakeholder re lationships th at arise from the deployment deployment of new e-business systems. systems.

END USER RESISTANCE AND INVOLVEMENT INVOLVEMENT

“People “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 keys to solving solving problems of end user resistance include: Proper end user education and training Improved communications with IS p rofessionals rofessionals End user involvement in the development and implementation of new systems. systems. Involvement and commitment of top management and all other business stakeholders. • • • •

Direct end user part icipation in systems systems development projects projects before a system is implemented is especially important to reducing t he potential for end user resistance. Allow end users members members of e-business e-business systems systems development teams or do their own development 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 organizational change management. man agement. Change management includes activities such as: Developing Developing in novative ways 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 t he benefits of change. • •

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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 about everything as often as possible, preferably in person. Make liberal use of financial incentives and recognition. Work within t he company culture, not around it. • • • • •

A Change Management Process: [Figure 9.18]


This change management model shows an eight-level process 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. IV. KEY TERMS AND CONCEPTS - DEFINED Business Model: A business 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 m ake money. money. Change Management: Managing the process of implementing major chan ges in information technology, technology, business processes, 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 satisfying a company’s company’s customer value an d business value goals. Process leads to development 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 technology to accomplish accomplish the stra tegic e-business priorities developed developed earlier in the planning plan ning p rocess.

Prof. Anatoly Sachenko 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 with a company’s e-business e-business vision and strategic goals such as reengineering business processes or gaining competitive advantages. End User Involvement Involvement: End users are involved in the development of new or improved computer applications without the di rect involvement of professional systems analysts. End User Resistance: A new way way of doing doing things thi ngs – generates some resistance in the people affected. New systems systems may result in end user resistance. The key to to minimizing e nd user resistance is to provide proper end user education and training, provide for good communications with IS professionals, professionals, and get the end users involved in the systems development development and implementation. Implementation: Implementation is dong what you 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 ma naging the t he effects effects of major changes in key organizational dimensions such as business processes, organizational st ructures, managerial roles, employee employee work assignments, and stakeholder responsibilities that arise from the deployment deployment of new e-business systems. 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: 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 evaluation of the potential benefits and risks a company faces faces when using e-business strategies and technologies for competitive competitive advantage. Models such as competitive forces, 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 th at 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 moving too quickly nowadays. Do

Prof. Anatoly Sachenko 

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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 relevant to the challenges facing 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 really well, yet yet few translate strategy stra tegy 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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