Strategic Planning for Information System PDF

27/08/45 Strategic Planning for Information System Chapter 1 The Evolving Roll Of Is/It In Organization: A Strategic Perspective 1 Introduction Most organizations in all...

27/08/45 Strategic Planning for Information System Chapter 1 The Evolving Roll Of Is/It In Organization: A Strategic Perspective 1 Introduction Most organizations in all sectors of industry, commerce, not-for-profit, and government are now fundamentally dependent on their information systems (IS) and information technology (IT). In industries such as telecommunications (media, entertainment, gambling and financial services, where the product is already, or is being increasingly, digitized), the very existence of an organization depends on the effective application of IS/IT. 2 1  27/08/45 Forces Affecting the Pace & Effectiveness of Progress in Using IT/IS & in Delivering Business Benefits: The capabilities of the technology; The economics of deploying the technology; The applications that are feasible; The skills & abilities available - in-house or external sources to develop the applications: The skills & abilities within the organization the applications; The pressures on the particular organization or its industry to improve performance. 3 Information system, information technology and “digital” Before considering a strategic perspective, it is important to have a clear understanding of the terms information systems (IS) and information technology (IT) and how they are distinguished. Recently the term 'digital' is being used more frequently in many organizations and in the practitioner and academic literature' - so how digital relates to IS/IT is also important to recognize. 4 2  27/08/45 Information system, information technology and “digital” Information systems (IS) existed in organizations long before the advent of information technology (IT) and, even today, there are still many 'systems' present in organizations with technology nowhere in sight. IT refers specifically to technology, essentially hardware, software and telecommunications networks, including devices of all kinds: computers, sensors, cables, satellites, servers, routers, PCs, phones, tablets; and all types of software: operating systems, data management, enterprise and social applications and personal productivity tools. Sometimes the term Information and Communication Technologies (ICT) is used instead of IT to recognize the convergence of traditional computer technology and telecommunications. Information systems (IS) are the means by which people and organizations, increasingly utilizing technology, gather, process, store, use and disseminate information. 5 Information system, information technology and “digital” Another term thar is frequency used along with IS and IT is application, i.e. an application of IT to handle information in some way. Essentially, an application refers to software, or a combination of software and hardware, used to address or enable a business or personal activity: for example, in businesses for general accounting, production scheduling, patient administration, customer order management or enabling collaborative working; or for an individual to book theatre tickets, check in for a flight or pay for parking. 6 3  27/08/45 Digital disruption: the impact of IS/IT Disruption caused by IS/IT actually began many decades ago when it was known at the time as 'business transformation' or 'business process re-engineering'. Today's focus on 'big data' and analytics is another iteration of the promised· 'information. In 1970s, became more feasible in the 1990s with the arrival of Data Warehousing and Online Application Processing (OLAP) tools, but as yet has been more a data deluge for many organizations rather than the source of strategic opportunities. 7 Digital disruption: the impact of IS/IT Indeed, back in 1985, Porter and Millar wrote a seminal article titled 'How information gives you a competitive advantage' with prescriptions that still resonate today. Microsoft founder Bill Gates noted: "I have a simple but strong belief. The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.“ 8 4  27/08/45 Digital Disruption of Organizations For some decades now, technology has been undermining the very logic of the organization, particularly those that are vertically integrated. Nobel economist Ronald Coase, in his seminal 1937 article 'The Nature of the Firm', argued that organizations were created because the 'transaction costs' of doing business in the open market were too great for complex enterprises, like building railroads, manufacturing cars or creating telephone networks. Since the commercialization of the internet and the accelerated shift online, all these transaction costs have plummeted as technology made it easier to search for information and transact with workers, suppliers and customers what has been referred to as a frictionless economy. 9 Digital Disruption of Organizations Work by Shapiro and Varian has highlighted the difference between 'physical goods' and 'information goods' in the digital world and the profound implications of those differences for strategy. Other organizational models are emerging that are a synthesis of firms and markets often called 'platfom' companies. Uber (the online taxi organization) is one example - it is already a big, global company and growing larger by shaping and creating a new marketplace. 10 5  27/08/45 Digital disruption of industries While no industry is immune to the impact of IT, some have been more affected than others. IT also accelerates the speed of disruption. With its iTunes store, it took Apple only five years to become America's largest music retailer, and just seven co become the world's largest. 11 The Characteristics of Digital Disruption There seem to be a number of fundamental pillars that characterize digital disruption and the shifts that those building the IS/ IT strategy must be aware of. From marketplace to marketspace: With the opening up of the Internet for commercial activity over 25 years ago, business has been steadily moving from being conducted in the physical marketplace to the virtual markets pace. This online environment has a number of distinctive features. Next Slide 12 6  27/08/45 The Characteristics of Digital Disruption … Cont 1. First, it is pervasive, directly reaching end-customers, facilitating the conduct of business directly with them. 2. Second, the trade-off between richness (the degree to which an organization can facilitate the exchange of information to deliver products/services that match customers' exact wants) and reach (the degree to which an organization can manage its activities to connect its customers) made in the physical world does not apply in an online environment. 3. Third, it is interactive, which is of crucial importance as much business and public sector activity consists of interactions: human and machine-to-machine (M2M) communication, data gathering, collaborative problem solving and negotiation. 13 The Characteristics of Digital Disruption … Cont 14 7  27/08/45 The Characteristics of Digital Disruption … Cont Blurring of physical/ digital divide Physical products are becoming increasingly digitized, blurring the traditional distinction between physical and virtual products. Even some of this decision making has now been automated using prognostic and diagnostic software, whilst the advanced analytical tools augment the knowledge, experience and capabilities of the engineers. In business-to-consumer (B2C) markets, Nest (acquired by Google) uses machine to- machine (M2M) connectivity to link its smart thermostats to other home devices, including washing machines and personal-fitness bands, thus positioning the company as providing the network hub in a digitally connected home. 15 The Characteristics of Digital Disruption … Cont 1. Moue from push to pull economy As produces, buildings, roads and assets of all types are 'instrumented' and able to gather data on their 'health', and become ever more connected, machine intelligence will be able to make decisions, or at least suggest answers, for us. Using analytics, retail organizations in particular are trying to predict which customers are likely to demand particular products and services. Rather than waiting for an approach from the customer, they seek to be proactive, even influencing their demand. for example, It uses GPS and Foursquare to tell them if they are close to a store with a special offer, provide saving suggestions, and to estimate how much customers will have in their account for the rest of the month based on past spending. 16 8  27/08/45 The Characteristics of Digital Disruption … Cont 2. Development of open standards An important lesson from past experiences in the technology world is that adoption and innovation are accelerated by open standards, which make the interchange and flow of data both easy to achieve technically and seamless to users. Even competitors are more likely to work together to develop standards for interconnection as they recognize that they too can bene fit with market expansion - the so-called network effects. 17 A Three-Era Model of evolving IT application in organization Objectives of the three eras Data Processing (DP) Strategic Information Management Information Era: Systems (SIS) Era: Systems (MIS) Era: To improve competitiveness To increase management To improve operational effectiveness by satisfying their by changing the nature or efficiency by automating information requirements for conduct of business (i.e. IS/IT information-based processes. as a source of competitive decision making. advantage). 18 9  27/08/45 A Three-Era Model of evolving IT application in organization … cont. We can describe the relationship between the three eras and the evolving application objectives as follows: 1. MIS rely on comprehensive, operational DP systems for accurate and timely information, SIS (such as those linking the company directly to its customers via the Internet and mobile devices) rely on sound DP or MIS for appropriate information provisioning or efficient processing. 2. SIS are not essentially different types of applications - the functions they perform are often the same as for DP or MIS applications - it is their impact on the business due to the changes they enable, or cause chat is the source of advantage. Thus, automating an element of a supply chain process can create a source of competitive advantage or using analytics to uncover new knowledge about customers can similarly enable an organization to develop a new business model to differentiate itself. 3. The strategic applications may put considerable stress on the DP and MIS applications that were developed for a less demanding environment - they may need to be redeveloped not because of intrinsic shortcomings but because they inhibit the benefits to be gained from the SIS. We have seen this happen as some organizations struggle to deliver apps to customers via smartphones. 19 A classification of the strategic uses of IS/IT The-four main types of strategic system are those applications that: 1. Share information via technology-based systems with customers/consumers and/or suppliers and change the nature of the relationship; 2. Produce more effective integration of the use of information in the organization's value- adding processes; 3. Enable the organization to create, develop, produce, market and deliver new or enhanced products or services or new value propositions based on information; 4. Augment people's cognitive processes in generating knowledge and insight from information; they provide executives, management and professionals with information to support the development, implementation and evaluation of strategies. 20 10  27/08/45 A classification of the strategic uses of IS/IT … Cont. A similar approach was adopted by Venkatraman in assessing how the strategic benefits from IT resulted from increasing the extent of business change (and risk). He described three types of 'revolutionary' uses of IT, which require considerable transformation in terms of what the organization does or how it does it: (next slide) 21 A classification of the strategic uses of IS/IT … Cont. Business process redesign: Using IS/IT to realign business activities and their relationships to achieve performance breakthroughs. Changing the way information is used by the organization and its Business network redesign: trading partners, thereby changing how the industry overall carries out the value-adding processes. Extending the market or product set based on information or Business scope redefinition: changing the role of the organization in the industry. 22 11  27/08/45 Linking to Customers, Business Partners and Suppliers Technology today enables organizations to connect cheaply and easily with customers, business partners and suppliers almost anywhere in the world; an outcome that has been described as the 'second economy. E-procurement and smartphone-based ordering systems have enabled low- cost linkages with customers and suppliers, plus in many cases enabling customers to track order and delivery progress online. Many companies are placing emphasis on finding ways to leverage social media and customers' growing eagerness to share opinions on brands, products and services, evidenced, for example, by the many comments about hotels and restaurants that customers post on Trip Advisor and video product reviews on YouTube. Many organizations are now competing for consumers' attention and time, so that they now have to consider the efficiency and ease of use of the app from the consumers' perspective. 23 Improved Integration of Internal Processes Effective internal integration of information requires the organization to overcome some of the traditional barriers to successful IS/IT investments, such as sharing and integrating information, reorganization of job roles, new accountabilities, new performance measures and organizational changes. For instance, telemarketing can dramatically reduce the cost of generating orders. This is what many organizations are seeking to achieve with the implementation of a single view of the customer, often enabled by (CRM) software. Enterprise Resource Planning (ERP) suites are an example of configurable information systems that provide integrated information and core information processes within and across functions in many types of organization. 24 12  27/08/45 Information-based Products and Services Adding information to, or 'informating', existing products has become an increasingly popular strategy. The concept of strategic thinking in the corporate planning department, where it was realized that a whole range of financial services were converging. More recently, online and mobile banking have incorporated a similar logic. More recently, online and mobile banking have incorporated a similar logic. Achieving advantages from this type of application requires a thorough knowledge of the products of the industry, their relative merits and, in particular, which customers will buy them and how they use and obtain value from them. 25 Augmenting Human Cognitive Processes to Support Strategic Decision Making The final type of strategic IS/IT application - to provide executives, managers and professionals with information to support strategic decisions - is dependent on other factors for success. Making strategic decisions requires a range of different types of information covering, for example, markets, customers and non-customers, industry, technologies and product developments and both global economics and the economies of the countries in which they operate. In addition, the experience of the decision maker is important, as very often intuition or 'gut feeling' plays a large part in some decisions, even strategic ones. 26 13  27/08/45 Augmenting Human Cognitive Processes to Support Strategic Decision Making …cont. Supporting management in making decisions has always been an objective of deploying IT Early MIS were designed to provide the information that managers determined they needed to make specific decisions. Recognizing that executives frequently make 'unstructured' decisions, a modelling capability was added. While these applications were typically referred to as DSS in the 1970s, technological developments have seen them evolve over the years into online analytical processing (OLAP), data mining, business intelligence (BI) and analytics. 27 Augmenting Human Cognitive Processes to Support Strategic Decision Making …cont. MIS, historically at least, rarely satisfied strategic decision-making requirements. There are several reasons for this: the lack of external information included, the simplicity of the applications, the rawness of the data and the lack of context. Strategic decisions are complex or 'wicked' and require the application of knowledge, judgement and experience to information for new knowledge to be uncovered or greater sense made of a situation. The increased availability of external data sources, which are readily accessible via the Internet, plus the potential offered by knowledge-based and scenario planning applications, used in conjunction with analytics applied to extensive 'big data' sources, enable organizations to explore and evaluate strategic options. 28 14  27/08/45 Success Factors in SIS External, not internal, focus: Looking at customers, competitors, suppliers, other industries what is happening in the outside world both business and social. Adding value, not cost reduction: although cost reductions may accrue due to business expansion at reduced marginal costs, 'doing it better, not cheaper' seems to be the maxim. Sharing the benefits: within the organization, with suppliers, customers, consumers and even competitors (on occasion). Understanding customer and what they do with the product or service: How they obtain value from it, and the problems they may encounter in gaining that value. 29 Success Factors in SIS ….Cont. Business-driven innovation, not technology-driven: The pressures of the marketplace drove developments in most cases. Incremental development, not the total application vision turned into reality: Doing one thing and building on and extending the success by a further development. Using the information gained from the systems to develop the business: Product and market analyses plus external market research information can be merged and then recut in any number of ways to identifying more appropriate marketing segmentation and product mix. 30 15  27/08/45 Success Factors in SIS ….Cont. Business-driven innovation, not technology-driven: The pressures of the marketplace drove developments in most cases. Using the information gained from the systems to develop the business: Product and market analyses plus external market research information can be merged and then recut in any number of ways to identifying more appropriate marketing segmentation and product mix. 31 Success Factors in SIS ….Cont. Incremental development, not the total application vision turned into reality: Doing one thing and building on and extending the success by a further development. Monetizing information: We have always known that information has, or should have, a value, although it is difficult to place an exact price on it usually. 32 16  27/08/45 A portfolio management perspective IS/IT investment Portfolio management is generally recognized as an integral component of any IS/IT strategy. “portfolio” in their definition of strategic planning for Information System, which they describe as me 'process or identifying a portfolio of computer-based applications that will assist a firm in execu1ing its business plans and realizing its goals. The model proposes an analysis of all existing, planned and potential applications into one of four categories, defined as strategic, high potential, key operational or support, depending on each application's current or expected contribution to business performance and the organization's future strategy. 33 A portfolio management perspective IS/IT investment STRATEGIC HIGH POTENTIAL High IS/IT Investment which IS/IT Investment which are critical/ to sustaining may be important in the future business achieving the future future business Importance to strategy success IS/IT Investment on IS/IT Investment which are which the organization valuable but not critical to currently depends for success success Low KEY OPERATIONAL SUPPOR High Importance to current business Low 34 17  27/08/45 A portfolio management perspective IS/IT investment Strategic: applications and integuments are critical future business success. They create or enable changes in how the organization conducts its business, with the aim of providing competitive advantage. Note chat, even when the technology used is 'leading edge', this does not indicate that the application is strategic; the assessment must be based on its intended or actual business contribution. High Potential are (Risk): investments in innovative applications of IS/IT which may create opportunities to gain a future advantage but are as yet unproven in terms of either the benefits they produce or the capabilities and performance of the technology, or both. 35 A portfolio management perspective IS/IT investment Key operational: applications and investments sustain the existing business operations, helping to avoid any disadvantage. These are often referred to as the organization's 'core' systems. It can be argued that, in many industries, substantial numbers of applications (e.g. EPOS (electronic point of sale), ATMs (automated teller machines) and ERP have become so pervasive that they have become 'mandatory' for survival. Any unavailability or failure of key operational applications will have serious negative impact on business performance. Support: applications and investments reduce costs by increasing business efficiency or improve management effectiveness bm do not sustain the business or provide any competitive advantage. Unlike key operational applications, failure or unavailability does not have an immediate negative effect on performance but will eventually do so if not corrected. Most support, as well as many well-established key operational, applications are now provided by software packages and are increasingly frequently being outsourced. 36 18  27/08/45 What is an IS/IT or digital strategy? In defining IS/IT strategy, it should be noted chat most definitions approach the issue from the IS perspective and in particular IS strategic planning, even though they effectively include IT strategic planning. The term Information Systems Strategic Planning (ISSP) was defined by (Boynton and Zmud) as 'activities directed toward (1) recognizing organizational opportunities for using information technology,(2) determining the resource requirements to exploit these opportunities, (3) and developing strategies and action plans for realizing these opportunities and for meeting the resource needs’. Earl's definition refers to the 'long term, directional plan which decides what to do with IT' that is concerned primarily with 'aligning IS development with business needs and seeking advantage from IT'. 37 What is an IS/IT or digital strategy? …cont. Infusion - the degree to which an organization becomes dependent on IS/ IT to carry out its core operations and manage the business; Diffusion - the degree to which IS/IT has become distributed throughout the organization and decisions concerning its use are devolved. 38 19  27/08/45 What is an IS/IT or digital strategy? …cont. 39 What is an IS/IT or digital strategy? …cont. ❖Plotting high and low degrees of infusion and diffusion produces four essentially different environments: Low diffusion/low infusion - the 'traditional' environment typical of companies using IT solely to improve efficiency on an application-by-application basis. Low diffusion/high infusion - where IS/IT is critical to business operations and control - the 'backbone'. The business could be seriously disadvantaged if systems fail, leading to highly centralized control of highly integrated applications and infrastructure. High diffusion/low infusion - largely decentralized control, giving business managers the ability to satisfy their local priorities and enable 'opportunistic’ investment, driven by short- term priorities and the desire to create business advantage. High diffusion/high infusion - this is a 'complex' environment that is difficult to manage: too much central control to avoid poor investments will limit innovation, hence new strategic opportunities may be missed; too little control and the core Sy'stems may disintegrate. Most organizations are in this quadrant today. 40 20  27/08/45 IS and IT strategies IS strategy is concerned with the organization's required information systems or application set, whereas the IT strategy is about the technology, infrastructure and associated specialist skills - our views of IS and IT strategies are consistent with this argument. The most effective route to achieving strategic benefit from IS/IT is to 'concentrate on rethinking business by analyzing current business problems and environmental change - and considering IT as just ne ingredient of the solution. The IS strategy is firmly grounded in die business, taking into consideration both alignment with the business strategy and the potential competitive impact - the “IS”. Demand'. Essentially, it defines and prioritizes the investments required to achieve the “ideal” application portfolio, the nature of the benefits expected, and the changes required to deliver those benefits, within the constraints of resources and application interdependencies. 41 IS and IT strategies … cont. One other concept that needs to be clarified and understood in the context of IS/IT is information management (IM). There should be a strategy in place to manage underpinning information or the implementation of the IS strategy will be fraught with problems. Information management is essentially concerned with the quality of information, its protection and overall governance and is supported by data management. Policies and practices which are enforced through application development standards as well as information governance policies. 42 21  27/08/45 IS and IT strategies … cont. 43 IS and IT strategies … cont. 44 22  27/08/45 IS/IT Strategy, Implementation and Delivering Business Value Building the IS and IT strategies is only the starting point of what is required if the available business value from IS/IT is to be optimized. Recent research suggests that making a strategic choice by itself, even if well understood and broadly bought into, does not impact business performance on its own. Within the IS strategy, potential investments must be prioritized, selected and authorized. This prioritization and selection should be based not just on desirability but also having the capability to successfully deliver the investment objectives and benefits. Investments have to be justified; programmes and projects have to be scoped, resourced and managed. 45 From strategic alignment to strategy co-evolution Strategic alignment describes the extent to which the organization's portfolio of IS/IT investments directly enables and supports its business strategy. Lack of strategic alignment is another of the main reasons organizations fail co realize value from IS/IT investments. (Henderson and Venkatraman) model is based on the building blocks of strategic and functional integration. They argue that alignment involves - at least - four domains of strategic choice: business strategy, organizational infrastructure and processes, digital strategy and IS/IT infrastructure and processes. 46 23  27/08/45 Digital strategies for the 21st century: building a dynamic capability to leverage IS/IT Neither technology nor competition is sciatic: technology continues to advance at breakneck speed and competitor strategic and new entrants mean that managers must be continuously vigilant. Organizations therefore require more than just an IS/IT strategy but a capability to continuously sense opportunities and threats and respond in a timely fashion. 47 The External Context It first illustrates the duality of technology in that it not only supports the strategy of an organization (arrow (a) - strategic alignment) but can also define the business, as stra1egic moves may not be possible without technology (arrow (b) - competitive impact). Most organizations do not exist in isolation but have competitors and are part of a wider industry and business environment. Competitors' moves, including new entrants, affect the dynamics of an industry and, consequently, the organization and its strategies (arrow c); at the same time, strategic plays made by the organization affect competitor moves (arrow d). Technological innovations can have disruptive effects on an industry (arrow e), rewriting the rules of competition arid even challenging traditional notions of industry structure. 48 24  27/08/45 The External Context … cont. 49 The Internal Context We see this IS/IT or digital capability as having three core dimensions working in harmony: fusing business knowledge with IS/IT knowledge, a flexible and reusable IT platform, and an effective use process. 1. Fusing IS/IT knowledge and business knowledge to ensure the conception of strategies to utilize technological innovation, to seize opportunities quickly and to implement these strategies successfully, including managing change and making appropriate technology sourcing decisions. 2. A flexible and reusable IT platform provides the technical infrastructure and resources needed to be able co respond quickly co competitor moves as well as the capacity to launch innovative applications creating new business produces, services or processes. 50 25  27/08/45 The Internal Context … cont. 3. An effective use process to link IS/TT assets with value realization, through the application of the technology as well as creating an environment conducive to collecting, organizing and maintaining information, together with embracing the right behaviours, both individually and collectively, for working with information. 51 The Internal Context … cont. 52 26  27/08/45 Strategic Planning for Information System Thank you For listening 53 27