it strategy - mim - oct 06

8/8/2019 IT Strategy - MIM - Oct 06

1/77

IT Strategy MIM Oct 06

Prof Pradeep PendseSr Associate Dean Systems & e-Business

Welingkar Institute of Management


2/77

9/29/2010 Management Information Systems 2

Agenda Need for Information & Information Systems

Determining Information Need Case Study - ABC Industrial Gases

Information & IT Strategy Mrs Fields Cookies

Conceptual Models for IS Planning

Role & Impact of IT on Business


3/77


Need for Information Is it time to buy ?

What is the Status of the Order ? Is it cheaper to buy or Make ?

What was the last time we purchased & at

what Price ?

Is it the right place to dig for Water/Oil etc


4/77


The Continuum Data

Information

Knowledge

Wisdom


5/77


Information - Key concepts Processed Data -> Information

Information Reduces Uncertainty

Value of Information

Time

Space/Context

Utility


6/77


Information - Concepts Quality

Source, Process, consumer

Accuracy, Precision

Biases

Information Content

Coding

Compression


7/77


Information - Concepts Relationship between Information & Orgn.

Impact of Hierarchy

Internal v/s External

Granularity

Level of Aggregation

Currency /Age/ Time Criticality

Level of Accuracy /Precision

Periodicity


8/77


Information - Concepts Relation with Organisation (Continued)

Relevance /Alignment with Goals

Information Needed for Controlling Self/Others

Biases/Objectivity/Consistency

Power Balance Information is Power

Intermediation

Overload Informating


9/77

9/29/2010 Management Information Systems

9

Information - Concepts Relation with Organisation (Continued)

Islands of Information

Cost

Information as a Corporate Asset

Information Security C-I-A

Reuse Knowledge Management/CRM etc


10/77


Information - Concepts Information as a strategic tool

Digital Nervous System/Real Time Enterprise

Knowledge Management

Information as a product

Information Content in a product

Information as the basis for Strategic Alliances


11/77


Information - Concepts Information and Decision Processes

Stages of Decision Making

Information

For Problem Definition

For Generating Alternatives

Evaluating Solution Structured V/s Unstructured Decisions


12/77


13/77

Determining Info Needs &

Focussing Info Systems tokey Business Needs


14/77


Determining Info Needs

A Case StudyABC Gasses

Facts of Case

The company is in the business of manufacturing Industrial gasses Supplies the same using Cylinders of various sizes

Has 20000 cylinders which it fills distributes and collects after use.

Business is unlimited

Company receives requests for specific gasses commits delivery

period and rates and instructs its factory which supplies the same - later

collects empty cylinders.

Order Booking, Scheduling/Priority , Marketing and money collection at

HO (mumbai)

Cylinder stock, filling with gas, despatch & cylinder collection with Plant


15/77


ABC Gasses - Continued

Customer

Respondto Enquiry

Enquiry DB


16/77



Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB


17/77



Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB

PrepareSchedule


18/77



Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB

PrepareSchedule

Produce


19/77


9


Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB

PrepareSchedule

Produce

Despatch

Challan

Customer


20/77


20


Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB

PrepareSchedule

Produce

Despatch

Challan

Customer

Prepare

Invoice

Invoice DB

Invoice


21/77


21


Customer

Respondto Enquiry

Enquiry DB

Respondto Enquiry

Order

OA noteOrder DB

PrepareSchedule

Produce

Despatch

Challan

Customer

Prepare

Invoice

Invoice DB

Invoice

Follow up

& collect


22/77


22

ABC Gasses - Contd

Problem Definition

As an Information Systems Consultant, identifythe Information Needs for the CEO of this

organisation

Suggest suitable modifications to the existing Data

Flows to make the IS more effective


23/77


23

ABC Gasses - Contd

Refocussing Systems

Key Performance Index Which Info System


24/77


24

Determining Information Needs

CSF/KPI methodCSFs KPIs

Customer Service Speed of ResponseFlexibility in Scheduling

% (On Time Deliveries ) / Total Deliveries

Complaints from Customers

Account Receiveables No. of Days , Amount,

Outstanding as a percentage of SalesQuality Cause wise analysis of Complaints

Profitability Usual P&L ratios

Operations Operating Costs, Downtime, Productivity etc


25/77


Determining Information Needs

CSF/KPI methodCSFs KPIsCylinder Turnaround Turnaround Time

Customer Service Speed of ResponseFlexibility in Scheduling

% (On Time Deliveries ) / Total Deliveries

Complaints from Customers

Account Receiveables No. of Days , Amount,

Outstanding as a percentage of SalesQuality Cause wise analysis of Complaints

Profitability Usual P&L ratios

Operations Operating Costs, Downtime, Productivity etc


26/77


ABC Gasses - Contd

Critical Constraint - Cylinder Turnaround

Reducing Cylinder TAT from 60 days to 30 days

= doubling the turnover of the business.

Thus underlying systems should be refocussed toprovide information for controlling the CSFs/KPis

mentioned.


27/77


ABC Gasses - Contd

Specific System Improvements Set up a new system for tracking cylinders

Provide information on

Cylinder Stock,

Payments Due Pending Orders

to the person handling Inquiry /Order CSR

The Customer Service (CSR) is a new role He/She will :

Book Orders

Answer Queries Expedite Collection of Outstanding Invoices

Expedite Collection of Cylinders

Charge Extra for Cylinders returned beyond X > Days


28/77


ABC Gasses Revised Data Flow

Customer

Enquiry &

Order Booking

Produce

DespatchPrepare

Invoice

Customer

Invoice

Collect

Money

& Cyliders

Accept Order

Information/OA note

Enquiry DB

PrepareSchedule

Orders

Pending

Invoices

Enquiry/Order

Cylinder

Record


29/77


ABC Gas Cylinders

Notes on New Data Flow Note that the changes in the Data flows

have been driven by defining the

Information needs at the top. The processes in Orange color are the re

engineered processes.

An Understanding of CSF/KPIs leads toaligning information systems to business

needs


30/77


Critical Success Factors Factors on which the success of the

organisation depends on

Top 10 Factors which need to be monitored

Examples : Customer Service, Cash Cycle,

Time/Cost/Resources in a Project etc


31/77


More about CSFs 5-6 CSFs

2-3 CSFs

2-3 CSFs

1-2 CSFs

Inherent to Business

Specific to Company

Specific to Domain

Environmental


32/77


Key Performance Indicators Cant Measure Cant Control

KPIs are Measures of a CSF

CSF can have one or more KPIs

Where CSF cannot be directly measured use surrogate

measures

eg of KPIs -

Delay (days), Production (tons), Productivity

(Sales/person),

Hotel Room Occupancy (Days booked/Days available)


33/77


CSF Methodology

Understand the broad workflow

Draw a DFD to depict the data flows

Identify CSFs

Define suitable measures - KPIs

Define Performance Standards for KPIs

Identify systems which provide Info on actuals to support each KPI

Identify changes in Info Flows & Processes

Draw Revised DFD Define appropriate MIS Report Formats at the desired level


34/77


When do you use CSF/KPI

methodology ? To Align information systems to Business Goals

To Define Information needs for at Enterprise, Department, Process or

Individual manager Level

For a Good MIS Report must have CSFs,KPIs, Standard ofPerformance, Actuals and Deviations

To Conduct an Effectiveness audit of existing Information Systems inan organisation

To Define Goals for a IT project


35/77

Conceptual Frameworks

for

Long Range Planning of InfoSystems


36/77


Conceptual Frameworks for

Information Systems Planning

CSF Methodology

Alfred Chandlers Strategy Trilogy

Nolans EDP Life Cycle

Cash & McFarlans Strategic Grid Adequacy Grid


37/77


Planning of Info Systems

Alfred Chandlers-Strategy Trilogy

IS/IT Strategy

Organisation Strategy

Business Strategy


38/77


Alfred Chandlers Model

Learnings for CIO Successful organisations have a strong coherence among

all the 3 strategies

The CIO can derive IS/IT strategy based on anunderstanding of the other2 strategies

In some IT Strategy can drive the other2 strategies egdevelop a new business model using e-business

Use the model as a tool to audit effectiveness of existingsystems Any lack of coherence between the 3 sideswould form the audit finding


39/77



Nolans -EDP LifeCycle

Initiation

Contagion

Integration

Admin

MaturityDecline


40/77


Nolans EDP Lifecyle

Learnings for a CIO A CIO can plan his/her next step.

A CIO must plan for revamping the

technology before it reaches the end of its

lifecycle

To Maximise the Gains from a technology

the CIO must ensure that the technologyInitiative is Absorbed quickly.


41/77



Nolans -EDP LifeCycle

Initiation

Contagion

Integration

Admin

MaturityDecline


42/77



Cash & McFarlans Strategic Grid

Low High

Low

High

Dependence

Impact

Turnaround Strategic

Support Factory


43/77


Mcfarlans Strategic Grid

Learnings for the CIO High Dependence applications such as Factory

type or Strategic type need continued investments

for contingency and maintenance CIO must plan for some R&D to identify

applications which can have a potential impact in

future i.e. Turnaround

CIO must invest in strategic applications to sustain

the differentiation until such time the application

becomes commodity and falls to a factory level.


44/77


Macfarlans Strategic Grid

-continuedExamples

Support Word Processing

ATMs in the early 90s were Turnaround today ATMs

have become commodity companies have triedmaintaining differentiation by allowing sale of Mutualfunds etc but now ATM service itself is being outsourced However dependence is high hence it is now a Factoryapplication

ERPs from the late 80s till now have also followed thepath of the ATM

One of the best examples of a Strategic application hasbeen the SABRE airline reservation system this createdsuch an entry barrier for other airlines that they filed anAnti trust suit against American Airlines.


45/77



Technology-Functional Adequacy Model

Low High

Low

High

Technical

Robustness

Functional Adequacy

0,09,0

9,90,9

Scrap/Rewrite


46/77


Conceptual Framework for

Strategic Information Management

Info Strategy

Info Mgmt

Strategy

Info Technology

Strategy

Change Mgmt

Strategy


47/77


48/77


Adhocracy Foundations Centralized Cooperate Entreprenur Harmony

Strategy Acquire H/w,

S/w

Find/Meet user

needs

Top-Dn IS

Planning

Integ Coord

Control

Environ Scan

for Opp.

Interactive

StrategicAdv

Structure None IS part of

Finance

Central DP Info Centre SBU Coalition Federal

Systems Adhoc Many apps

Backlog

Central

End user

Decentral.

LowCoord

DSS

Decentral.

Coord

DSS/Strategic

Inter Org,

Extern/Intern

data Integ.

Staff Programmer /

Contractors

Sys Analyst

DP manager

IS Planners

DB Admin

BA, CIO Corp Business

& IS planner

IS Director

Style Unaware Dont Bother

me (busy)

Abrogation /

Delegation

Democratic

Dialectic

Individualistic

Champions

Business

Team

Skills Technical Sys DevMethodology

IS knows

Proj Mgmt

IS and userknow

Entrepreunerial , mktg skills

Sr Mgmtunderstands

Super ord

Goals

Obfuscation Confusion Sr Mgmt

Concerned

Cooperation Opportunistic Interactive

Plg


49/77


Strategic Info Systems Planning

Parker (1989), Henderson & Venkatraman (1993)

IT Strategy

Business Processes

Business Strategy

IT Processes


50/77


Approaches to Strategic Info Sys PlgBusiness-Led Method

Driven

Administrative Technological Organisational

Emphasis Business Technique Resources Model Learning

Basis Business Plans Best method Procedure Rigor Partnership

Ends Plan Strategy Portfolio Architecture Themes

Methods Ours Best None Engineering Any Way

Nature Business Top-Down Bottom-Up Blueprints Interactive

Influencer IS Planner Consultants Committees Method Teams

Wrt Business

Strategy

Fix Points Derive Criteria Objectives Look at

BusinessPriority

Setting

The Board Method

Recommends

Central

Committee

Compromise Emerge

IS Role Driver Initiator Bureaucrat Architect Team Member

Metaphor Its Common

Sense

Its good for

you

Survival of

Fittest

We nearly

aborted it

Think IS all

the time


51/77


Five approaches summarised

Business Led Method Driven Administrative Technological Organisational

Underpinning

Assumption

Business Plans

should drive IS

plans

IS will be

enhanced by

using formal

SISP method

SISP should

conform to

Mgmt

procedures

SISP is an

exercise in

Business &

Info Modelling

SISP is

continuous &

shared by

Business & IS

Emphasis on

Approach

Business leads

IS

Selection of

best method

Allocation of

IS resources to

meet agreed

needs

Production of

models and

blueprints

Orgn learns

about business

problems and

opportunities

& contribution

of IT

Major

Influencers of

outcomes

IS planners Practitioners of

the method

Resource

Planners &

steering grps

Modelling

Method

employed

Permanent and

ad hoc teams

of key mgrs,IS

Slogan Business

Drives IS

Strategy needs

method

Follow the

rules

IS needs

blueprints

Themes with

teams


52/77


SISP - tips

SISP requires holistic approach

Methods are necessary but process is important

Explicit inclusion of Implementation plans is reqd

Users and Line mgrs work in partnership the

organisational model

Mix an match approach is good Combination of formal methods and informal

interactions


53/77


SISP Methods

Business Systems Planning IBM

Pro Planner Holland Systems

Information Engineering- Knowledgeware

Method1 Andersen Consulting (10 phases)

CSF Method

Ends/Needs Analysis Portfolio

Strategy Set Transformation etc


54/77


Business Systems Planning IBM

Enterprise Analysis

Enterprise Modelling

Executive Interviews

Information opportunity analysis

IS Strategies and recommendations

Data Architeture Design

Process Architecture Design

Existing Systems Review

Implementation Planning

Information Management Recommendations


55/77


Evaluating Strategy

Alignment Business ,Orgn & IS (1990)

IT Strategic Grid - McFarlan

Value Chain - Porter & Millar (1991)

IT Investment Mapping

I t t M B i / IT l


56/77


Investment Map Business v/s IT plans

Infrastructure Business Process Market Influence

Investment orientation

B

EN

E

F

I

T

Expansion

Risk Min.

Productivity

Planned Business StrategyFocus on Opportunity

Current and Planned IT investments

-Focus on Costs

Cl if i IT I t t


57/77


Classifying IT Investments

Investment Match Business Objectives with type Of IT Project

B

EN

E

F

I

T

Must

Do

Architecture

Effectiveness

Efficiency

Competitive

edge

R&DSoft

Hard

CostsSoft

M t hi P j t t T h i


58/77


Matching Projects to Techniques

Investment Match Eval Techniques with Tasks on Hand

B

EN

E

F

I

T

Return on Mgmt

Performance

Metrics

NPV

Competitive

edge

R&DSoft

Head

Info Econ

Cost BenefitRisk Analysis

CostsSoft


59/77

Information as a Strategic Tool


60/77


Information as a Strategic Tool

Customer Bonding

Create a Learning Organisation

Innovation

Reduce Costs Co-Creation

Manage Risks


61/77


Stages in Customer Bonding

Conquest

Satisfaction

Loyalty

Bonding


62/77


Helping customers to buy

Is it for me ?

How much does it cost ?

Can I chose it easily ?

How does it compare with other options

Is it available ?

Can I try it ?


63/77


Market Sensing

Market Sensing

Responsiveness

Improved customer value

Enhanced Performance


64/77


A learning organisation

The wind info surfing

The forest Conceptualisation

The fire Action

The mountain Reflection from a peak


65/77


Knowledge Management

Successful KM strategy depends upon :

- Creating a unique social structure- Developing a suitable information infrastructure to support

it


66/77


Information & Innovation

Identify type of intelligence reqd

Creating Heightened awareness in all

Mechanisms to capture, cross fertilize

information required for innovation


67/77


Types of Information Sensing

Market Sniffer Networks

Competitor Scout networks

Technology Gatekeepers


68/77


Reducing Costs Co-Configiration

Create sales opportunities valued by customers

Stage Mkt Positioning- Transformed by

Craft Novelty - Development Mass Production Commodity-Linking

Process Enhancement Quality-Modularisation

Mass Customisation-Precision-Networking

Co-Configuration-Customer Intelligence


69/77


Strategic Cost Initiatives

Cost and profitability analysis

Waste Elimination & lean Operations

Flat focussed Organisation

Product cost planning (target costing)

Supplier management, value chain analysis and

outsourcing Kaizen costing

Asset Economics


70/77


Information for Risk Mgmt

Triggers of dislocation of IT

IT/IS change

Operations Change

Process Change

People Change

Affects information Integrity


71/77


Using Info for Strategic advantage

The SIA Framework

Add Value

Reduce costs

Create a New reality

Minimise Risk


72/77


73/77


Impact of IT on Business

Basic Productivity

Business Process Transform

Business Network Transform

Business Scope Transform


74/77


Impact of IT on Productivity

Integrates multiple process stages

Eliminates Muliplicity in Processing

Reduces Process cycle time & Wait time

Reduces Transaction Costs

Disintermediation

Flattening the organisation

Leaves People free for people oriented tasks

Scalability in the face of growing transaction volumes

24X7X365 availability increases services per day


75/77


Competing with IT

Productivity and Service Efficiency

Geographical Spread

Penetration

Customer Lock-in

New Customer Experience

Supply side integration

Barriers to entry


76/77


Competing with IT

Mass Customisation

Yield Management

Differentiation based on Cost

Quality

Delivery Time to Market

Transperancy


77/77


Competing with IT

Self Help & disintermediation

Collaboration

Build Communities

Spawn New Businesses

Cross Selling and Up Selling

Quality-Working LifeMobility/Freedom

it strategy - mim - oct 06

Documents