developing business and it strategies

8/10/2019 Developing Business and IT Strategies

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McGraw-Hill/Irwin Copyright 2008, The McGraw-Hill Companies, Inc. All rights reserved.

Developing Business/IT Strategies

Chapter

11


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Discuss the role of planning in the businessuse of information technology, using the scenario

approach and planning for competitive advantage

as examples

Discuss the role of planning and business models

in the development of business/IT strategies,

architectures, and applications

Identify several change management solutions for

end user resistance to the implementation of new

IT-based business strategies and applications

Learning Objectives


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Planning Fundamentals

Information technology has created a seismicshift in the way companies do business

Just knowing the importance and structure of

e-business is not enough

You must create and implement an action plan

that allows you to make the transition from an

old business design to a new e-business design


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Case 1: The Portfolio Approach to IT

7-Eleven blends its IT investments with a rangeof assertive IT practices and capabilities

Counselor visits to stores twice a week

Delivers of stock three times a day A transparent information infrastructure

that links 70,000 computers at stores,

headquarters, and supplier sites


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MIT identified four broad classifications of ITinvestments that can be managed as a portfolio

to minimize business risk and optimize return

Transactional: used to cut costs or increase

throughput for the same cost

Informational: provide information for

accounting, reporting, compliance,

communication, or analysis


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Strategic: used to gain competitive advantageby supporting entry into new markets or by

helping to develop new products, services, or

business products

Infrastructure: typically aimed at providing

a flexible base for future business initiatives or

reducing long-term IT costs via consolidation


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Case Study Questions

What is the portfolio management approachto IT planning?

Use the four classifications of IT investments

and examples of companies in this case to

illustrate your answer

What are the keys to 7-Eleven Japans great

success compared to other retailers in Japan?

How does IT support such success? How could 7-Eleven Japan do even better?

What role would IT play?


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Components of Organizational Planning


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Planning

Strategic Planning Deals with the development of an organizations

mission, goals, strategies, and policies

Begins with strategic visioning questions

Tactical Planning The setting of objectives and the development

of procedures, rules, schedules, and budgets

Operational Planning Done on a short-term basis to implement and

control day-to-day operations


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Strategic Visioning Questions


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The Scenario Approach

Gaining in popularity as a less formal, but morerealistic, strategic planning methodology

Teams of managers and planners participate in

microworld or virtual world exercises

Business scenarios are created and evaluated

Alternative scenarios are then created


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Trends that Affect Strategic Planning


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Planning for Competitive Advantage

Strategic business/IT planning Involves evaluating the potential benefits

and risks of using IT-based strategies and

technologies for competitive advantage

The following models can help generate ideas

for the strategic use of IT to support initiatives

Competitive forces

Competitive strategies

Value chain


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Strategic Opportunities Matrix


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SWOT Analysis

SWOT stands for Strengths: a companys core competencies

and resources

Weaknesses: areas of substandard business

performance compared to others

Opportunities: potential for new business

markets or innovative breakthroughs that

might expand current markets Threats: anything that has the potential for

business and market losses


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Business Models and Planning

Business model answers vital questions aboutthe fundamental components of a business

Who are our customers?

What do our customers value?

How much will it cost to deliver that value?

How do we make money in this business?


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Questions for all Business Models

Customer value Are we offering somethingdistinctive or at a lower cost

than our competitors?

Scope To which customers is this valuebeing offered?

What range of products/services

offered embody this value?

Pricing How do we price the value?


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Revenue source Where do the dollars come from?Who pays for what value and when?

What are the margins in each

market, and what drives them?

What drives value in each source?

Connected

activities

What do we have to do to offer this

value and when?

How connected are these activities?


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Implementation What structure, systems, people, andenvironment do we need to carry out

these activities?

What is the fit between them?

Sustainability What is it about the firm that makes

it difficult for other to imitate it?

How do we keep making money?

How do we sustain our competitive

advantage?


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Capabilities What are our capabilities andcapabilities gaps?

How do we fill these gaps?

Is there something distinctive about

these capabilities that lets us offer

the value better than other firms?

Is this capability hard to imitate?

What are the sources of thesecapabilities?


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Questions Specific to E-Business Models

CustomerValue What is it about Internet technologiesthat allows us to offer customers

something distinctive?

Can Internet technologies help us

to solve a new set of problems forcustomers?

Scope What is the scope of customers that

Internet technologies enable us to

reach?

Does the Internet alter the product or

service mix that embodies the firms

products?


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Pricing How does the Internet make pricingdifferent?

Revenue source Are revenue sources different with

the Internet?

What is new?

Connected

activities

How many new activities must be

performed as a result of the Internet?

How much better can Internet

technologies help us perform

existing activities?


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Implementation How do Internet technologies affectthe strategy, structure, systems,

people, and environment of the firm?

Capabilities What new capabilities do we need?What is the impact of Internet

technologies on existing capabilities?

Sustainability Do Internet technologies makesustainability easier or more difficult?

How can the firm take advantage

of it?


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Business Models as Planning Tools

A business model forces rigorously andsystematic thinking about the value and

viability of business initiatives

The strategic planning process is then used

to develop unique business strategies that

capitalize on a business model

The goal is to gain a competitive advantage

in an industry or marketplace


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The Business/IT Planning Process


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The Business/IT Planning Process

The business/IT planning process has threemajor components

Strategic development

Resource management

Technology architecture


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Information Technology Architecture

The IT architecture is a conceptual designthat includes these major components

Technology platform

Data resources

Application architecture

IT organization


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Balanced Scorecard

The balanced scorecard measures a companysactivities in terms of vision and strategies

The system has four processes

Translating vision into operational goals Communicating the vision and linking it

to individual performance

Business planning

Feedback/learning and strategy adjustment


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Balanced Scorecard

The business perspectives a scorecard measures Financial: reflects financial performance,

such as cash flow or ROI

Customer: measures having a direct impact on

customers, such as time to process phone calls

Business process: reflects the performance of

key business processes, such as time spent

prospecting or process costs Learning/growth: the companys learning curve,

such as how many hours are spent training staff


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Identifying Business/IT Strategies

The most valuable Internet applications allowcompanies to

Transcend communication barriers

Establish connections that enhance productivity

Stimulate innovative development

Improve customer relations


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Strategic Positioning Matrix


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Strategic Matrix

Cost and Efficiency Improvements Use the Internet as a fast, low-cost way to

communicate and interact with others

Use of e-mail, chat systems, discussion groups,

and company websites

Performance Improvement in Effectiveness

Major improvements in business effectiveness

recommended

Increase use of Internet-based technologies,

such as intranets and extranets


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Strategic Strategies

Global Market Penetration Capitalize on a high degree of customer and

competitor connectivity and use of IT

Use e-commerce websites with value-added

information services and extensive online

customer support

Product and Service Transformation

Develop and deploy new Internet-based

products and services that strategically

reposition it in the marketplace


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E-Business Strategy Examples

Market Creator:be among the first to marketand remain aheadof the competition by

continuously innovating

Channel Reconfiguration: use the Internetas a new channel to directly access customers,

make sales, and fulfill orders

Transaction Intermediary: Use the Internet

to process purchases


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E-Business Strategy Examples

Infomediary: use the Internet to reduce thesearch cost; offer a unified process for collecting

the information needed to make a large purchase

Self-Service Innovator:provide a comprehensive

suite of services that the customers employees

can use directly

Supply Chain Innovator: use the Internet to

streamline supply chain interactions

Channel Mastery: use the Internet as a sales

and service channel


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Business Application Planning Process


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Comparing Planning Approaches


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E-Business Architecture Planning


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Implementation

Many companies plan changes very well

Few manage to convert a plan into action

This is true even if senior management

consistently identifies e-business as an

area of great opportunity


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Case 2: Infosys Implementation Challenges

Company adage is learn once, use everywhere Developed a companywide knowledge

management program

Offered knowledge currency units (KCUs)

for contributions to jump-start usage

Issues encountered

Information overload

Slow searches for reusable information Shortage of volunteer reviewers

Contributions of questionable quality

Information hoarding


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Case 2: Infosys Implementation Challenges

Revamped the System Formulated a composite KCU score based

on information usefulness and benefit

Information rated by actual users

Demanded justification for high ratings

Reduced the number of KCUs awarded for

reviewing contributions

Raised the bar for cashing in KCU incentivepoints for monetary rewards


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Why do you think the knowledge managementsystem at Infosys faced such serious

implementation challenges?

What steps did the KM group at Infosys taketo improve participation in the KM system?

Why were some of these initiatives

counterproductive?

The KM group responded well with corrective

initiatives. Do you think these will succeed?


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What change management initiatives shouldthe KM group have initiated in Infosys before

attempting to develop and implement

knowledge management at the company?

Defend your proposals, paying particular

attention to the final quote in the case by

a long-time KM manager at Infosys


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Implementing Information Technology

Many businesses have undergone multiplemajor reorganization since the early 1980s Business process reengineering

Installation and upgrades of an ERP system

Upgrading legacy systems to be Y2K compliant Creating shared service centers

Just-in-time manufacturing

Sales force automation

Contract manufacturing The introduction of euro currency

E-business is the latest organizational change


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Impact and Scope of Implementing IT


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Intranet Enterprise Portal Challenges

Security, security, security Defining the scope and purpose of the portal

Finding the time and the money

Ensuring consistent data quality

Getting employees to use it

Organizing the data

Finding technical expertise

Integrating the pieces Making it easy to use

Providing all users with access


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Enterprise Resource Planning Challenges

Getting end user buy-in Scheduling/planning

Integrating legacy systems/data

Getting management buy-in

Multiple/international sites and partners

Changing culture and mind-sets

IT training

Getting, keeping IT staff Moving to a new platform

Performance/system upgrades


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End User Resistance and Involvement

Any way of doing things generates someresistance from the people affected

CRM projects have a history of failure

Up to 75 percent of CRM projects fail tomeet their objectives

This is often due to sales force automation

problems and unaddressed cultural issues

Sales staffs are often resistant to, or fearful

of, using CRM systems


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Keys to Solving End User Resistance

Keys to solving end user resistance problems Education and training

End-user involvement in organizational

changes and system development

Requiring involvement and commitment of

top management and all stakeholders

Systems that inconvenience or frustrate users

cannot be effective, no matter how technicallyelegant or efficient

Ob l KM S


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Obstacles to KM Systems

Ch M t


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Change Management

People factors have the highest levelof difficulty and the longest time to resolve

of any dimension of change management

K Di i f Ch M t


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Key Dimensions of Change Management

Ch M t


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Change Management

Implementing a new e-business applicationmay involve

Developing an action plan

Assigning managers as change sponsors

Developing employee change teams

Encouraging open communications and

feedback about organizational changes

Ch M t


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Change Management

Key tactics recommended by change experts Involve as many people as possible in e-business

planning and application development

Make constant change an expected part

of the culture

Tell everyone as much as possible about

everything, as often as possible, in person

Make liberal use of financial incentives andrecognition

Work within the company culture, not around it

A Ch M t P


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A Change Management Process

A t M h ll T f ti


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Avnet Marshalls Transformation

C 3 St t i f S d M


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Case 3: Strategies of Second Movers

Gain an edge by observing what the firstmover has done

Be better, faster, cheaper, easier

Trip up incumbents with tactics from other fields

Swipe business models and start your own race

Follow the biggest leader you can find

Aim for the leaders Achilles heel

C St d Q ti


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Is the second-mover advantage always agood planning strategy?

What can a front-runner business do to foil

the assaults of second movers?

Do second movers always have the

advantage in Web-based business success?

Case 4 Planning for Inno ation


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Case 4: Planning for Innovation

Federal Express spends $1 billion/year on IT Primary focus is on revenue-generating,

customer-satisfaction-generating, and

strategic-advantage technology

Operational technology receives slightlyless attention

Company philosophies

Its easier to copy than to innovate

Move, communicate, and shoot



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How do the IT investment strategies and focusof FedEx and its main competitor UPS differ?

Which company has the better strategy?

Is FedExs move, communicate, shoot ITstrategy a good one for its competitive battle

with UPS?

Is it a good model of competitive IT strategy for

other types of companies?



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FedEx CIO Carter says his company is in thebusiness of engineering time.

Is this a good business vision for FedEx?

How vital is IT to this definition of FedExs

business?

developing business and it strategies

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