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Developing Business/IT Strategies

Developing Business/IT Strategies

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Chapter11

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•Discuss the role of planning in the businessuse of information technology, using the scenarioapproach and planning for competitive advantageas examples

•Discuss the role of planning and business modelsin the development of business/IT strategies,architectures, and applications

•Identify several change management solutions forend user resistance to the implementation of newIT-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 ofe-business is not enough

•You must create and implement an action planthat allows you to make the transition from anold business design to a new e-business design

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Components of Organizational Planning

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Planning

•Strategic Planning

•Deals with the development of an organization’smission, goals, strategies, and policies

•Begins with strategic visioning questions

• Tactical Planning

•The setting of objectives and the developmentof procedures, rules, schedules, and budgets

•Operational Planning

•Done on a short-term basis to implement andcontrol 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 inmicroworld 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 benefitsand risks of using IT-based strategies andtechnologies for competitive advantage

•The following models can help generate ideasfor 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 company’s core competenciesand resources

•Weaknesses: areas of substandard businessperformance compared to others

•Opportunities: potential for new businessmarkets or innovative breakthroughs thatmight expand current markets

•Threats: anything that has the potential forbusiness 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 costthan our competitors?

Scope

To which customers is this valuebeing offered?

What range of products/servicesoffered embody this value?

Pricing

How do we price the value?

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Questions for all Business Models

Revenue source

Where do the dollars come from?Who pays for what value and when?What are the margins in eachmarket, and what drives them?

What drives value in each source?

Connectedactivities

What do we have to do to offer thisvalue and when?

How connected are these activities?

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Questions for all Business Models

Implementation

What structure, systems, people, andenvironment do we need to carry outthese activities?

What is the fit between them?

Sustainability

What is it about the firm that makesit difficult for other to imitate it?

How do we keep making money?

How do we sustain our competitiveadvantage?

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Questions for all Business Models

Capabilities

What are our capabilities andcapabilities gaps?

How do we fill these gaps?

Is there something distinctive aboutthese capabilities that lets us offerthe 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 customerssomething distinctive?

Can Internet technologies help usto solve a new set of problems forcustomers?

Scope

What is the scope of customers thatInternet technologies enable us toreach?

Does the Internet alter the product orservice mix that embodies the firm’sproducts?

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Questions Specific to E-Business Models

Pricing

How does the Internet make pricingdifferent?

Revenue source

Are revenue sources different withthe Internet?

What is new?

Connectedactivities

How many new activities must beperformed as a result of the Internet?

How much better can Internettechnologies help us performexisting activities?

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Questions Specific to E-Business Models

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 Internettechnologies on existing capabilities?

Sustainability

Do Internet technologies makesustainability easier or more difficult?

How can the firm take advantageof it?

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Business Models as Planning Tools

•A business model forces rigorously andsystematic thinking about the value andviability of business initiatives

•The strategic planning process is then usedto develop unique business strategies thatcapitalize on a business model

•The goal is to gain a competitive advantagein 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 company’sactivities in terms of vision and strategies

•The system has four processes

•Translating vision into operational goals

•Communicating the vision and linking itto 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 oncustomers, such as time to process phone calls

•Business process: reflects the performance ofkey business processes, such as time spentprospecting or process costs

•Learning/growth: the company’s 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 tocommunicate and interact with others

•Use of e-mail, chat systems, discussion groups,and company websites

•Performance Improvement in Effectiveness

•Major improvements in business effectivenessrecommended

•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 andcompetitor connectivity and use of IT

•Use e-commerce websites with value-addedinformation services and extensive onlinecustomer support

•Product and Service Transformation

•Develop and deploy new Internet-basedproducts and services that strategicallyreposition it in the marketplace

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E-Business Strategy Examples

•Market Creator: be among the first to marketand remain ahead of the competition bycontinuously innovating

•Channel Reconfiguration: use the Internetas a new channel to directly access customers,make sales, and fulfill orders

•Transaction Intermediary: Use the Internetto process purchases

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E-Business Strategy Examples

•Infomediary: use the Internet to reduce thesearch cost; offer a unified process for collectingthe information needed to make a large purchase

•Self-Service Innovator: provide a comprehensivesuite of services that the customer’s employeescan use directly

•Supply Chain Innovator: use the Internet tostreamline supply chain interactions

•Channel Mastery: use the Internet as a salesand 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 managementconsistently identifies e-business as anarea of great opportunity

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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 automationproblems and unaddressed cultural issues

•Sales staffs are often resistant to, or fearfulof, 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 organizationalchanges and system development

•Requiring involvement and commitment oftop management and all stakeholders

•Systems that inconvenience or frustrate userscannot be effective, no matter how technicallyelegant or efficient

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Obstacles to KM Systems

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Change Management

People factors have the highest levelof difficulty and the longest time to resolveof any dimension of change management

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Key Dimensions of Change Management

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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 andfeedback about organizational changes

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Change Management

•Key tactics recommended by change experts

•Involve as many people as possible in e-businessplanning and application development

•Make constant change an expected partof the culture

•Tell everyone as much as possible abouteverything, as often as possible, in person

•Make liberal use of financial incentives andrecognition

•Work within the company culture, not around it

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A Change Management Process

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Avnet Marshall’s Transformation