Chapter 2 Developing IT for Business Value PDF

31/01/2024 Chapter 2 Developing IT for Business Value IT Strategy & Innovation Edition 5.0 James D. McKe...

31/01/2024 Chapter 2 Developing IT for Business Value IT Strategy & Innovation Edition 5.0 James D. McKeen, Heather A. Smith Chapter 2 Learning Objectives  Importance of IT strategy  Modelling strategy co-evolution  IT strategy development pitfalls  Four IT strategy critical success factors  Improving IT strategy  CIO challenges to IT Strategy development James D. McKeen, Heather A. Smith © Prospect Press 2022 2-2 1  31/01/2024 Importance of IT Strategy for Business Value  Goal: Link IT strategy as closely as possible to business strategy because:  IT is delivering top-line value  Continuous planning facilitates responsiveness  New organizational capabilities emerge as IT strategy and business strategy work together James D. McKeen, Heather A. Smith © Prospect Press 2022 10-3 Strategy Co-Evolution  Now, difficult to achieve sustainable competitive advantage  Cross-functional systems require integrated enterprise and technology strategies  Rapid response = holistic evolutionary IT/business strategies  Creates new strategic capabilities James D. McKeen, Heather A. Smith © Prospect Press 2022 2-4 2  31/01/2024 Figure 2.1 New Organizational Capabilities are Driven by the Co-Evolution of Strategy, Technology and Behavior/Structure James D. McKeen, Heather A. Smith © Prospect Press 2022 2-5 Common Pitfalls with IT Strategy Alignment 1) Poor alignment 2) Lack of shared knowledge 3) Lack of big picture 4) IT-owned IT projects James D. McKeen, Heather A. Smith © Prospect Press 2022 2-6 3  31/01/2024 IT Strategy Implementation  Two key components:  Reducing fixed costs  Allocating the remaining budget to achieve the desired strategy  Embedded assumptions need to be articulated  Project planning (prioritization) is the how James D. McKeen, Heather A. Smith © Prospect Press 2022 2-7 Five Types of Projects to Prioritize Project Type Easy to Risk Payback Agree on level 1) Business improvement: Yes Low Short to for cost reduction medium 2) Business enabling: Likely Unclear Unclear extend or transform 3) Busines opportunities: No High Unclear small scale experiments 4) Opportunity leverage: No Medium Unclear scale up the experiments 5) Infrastructure: improve No Low Long term capacity for the future James D. McKeen, Heather A. Smith © Prospect Press 2022 2-8 4  31/01/2024 Strategy Development: Four Critical Success Factors 1) Revisit your business model 2) Have strategic themes 3) Get the right people involved 4) Work in partnership with the business James D. McKeen, Heather A. Smith © Prospect Press 2022 2-9 (1) Revisit Your Business Model  Business model needs to be clear  IT translates IT strategy into business language  All managers understand how business works as a whole James D. McKeen, Heather A. Smith © Prospect Press 2022 2-10 5  31/01/2024 (2) Have Strategic Themes  IT strategy is about carefully crafted programs  Focus on developing specific business capabilities  Smaller initiatives in a program are easier to adapt and manage James D. McKeen, Heather A. Smith © Prospect Press 2022 2-11 (3) Get the Right People Involved  Senior business management takes a leadership role in IT decision making  CIO and executive team regularly discuss IT strategies  Business managers and key stakeholders involved in determining technology opportunities (e.g. account manager positions) James D. McKeen, Heather A. Smith © Prospect Press 2022 2-12 6  31/01/2024 (4) Work in Partnership with the Business  Business and IT executives must have input into the strategy  Capabilities need to be continuously and dynamically synchronized James D. McKeen, Heather A. Smith © Prospect Press 2022 2-13 Practices for Improving IT Strategy Development and Implementation (1 of 3)  “Rolling” planning and budget cycles  Update more than once per year  An enterprise architecture  An integrated and IT blueprint  Addresses business processes, applications, infrastructure and data James D. McKeen, Heather A. Smith © Prospect Press 2022 2-14 7  31/01/2024 Practices for Improving IT Strategy Development and Implementation (2 of 3)  Different funding “buckets”  Allocate funding to all five types of IT projects  Used to assist balancing infrastructure (utility) spending strategically  Account relationship managers  Provide systematic assessment of new opportunities  Identify synergies and interdependencies between lines of business James D. McKeen, Heather A. Smith © Prospect Press 2022 2-15 Practices for Improving IT Strategy Development and Implementation (3 of 3)  Use a prioritization rubric  Consider adopting multiple approaches to justify IT projects  Business-enabling projects may need cross-functional sponsorship  Align infrastructure spending with strategic needs James D. McKeen, Heather A. Smith © Prospect Press 2022 2-16 8  31/01/2024 Challenges for CIOs: Barriers to Effective IT Strategy Development (1 of 2)  Lack of a governance structure for enterprise-wide projects  Inadequate enterprise-wide funding models  Poorly integrated processes for developing IT and business strategies James D. McKeen, Heather A. Smith © Prospect Press 2022 2-17 Challenges for CIOs: Barriers to Effective IT Strategy Development (2 of 2)  Traditional budget cycles (annual, IT and business separated by time)  Unbalanced strategic and tactical initiatives  Weak strategizing skills James D. McKeen, Heather A. Smith © Prospect Press 2022 2-18 9  31/01/2024 Making Strides in Articulating and Linking IT Strategy (1 of 2)  Formal structure to identify and manage interdependencies  Enterprise-wide funding models  Specific assignment of responsibility for implementation  Develop IT and business strategy in parallel  Provide processes for strategy integration and alignment James D. McKeen, Heather A. Smith © Prospect Press 2022 2-19 Making Strides in Articulating and Linking IT Strategy (2 of 2)  Implement rolling assessment (quarterly) plus extension of long- term plans  Examine options for improving strategizing skills and methodologies  Consider multiple methods of portraying conflicting strategic imperatives James D. McKeen, Heather A. Smith © Prospect Press 2022 2-20 10  31/01/2024 Chapter 2 Conclusion (1 of 2)  Effective strategy development is vital  Organizations need to scrutinize strategy development and implementation  Effective IT strategy needs to be integrated with business strategy James D. McKeen, Heather A. Smith © Prospect Press 2022 2-21 Chapter 2 Conclusion (2 of 2)  Strategy synchronization needs to be flexible  Integrated enterprise strategies enable responsiveness to an evolving business environment James D. McKeen, Heather A. Smith © Prospect Press 2022 2-22 11  31/01/2024 James D. McKeen, Heather A. 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