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InformationSystems

StrategyLearningoutcomesAfterthislecture,youshouldbeableto:DescribeapproachesfordevelopingISstrategy;AssessthesuitabilityoftoolsforselectionandgenerationofISstrategy;EvaluateapproachesbywhichIScansupportandimpactbusinessstrategy;ExplainhowISstrategycansupportinformationmanagementandknowledgemanagementstrategies.ManagementissuesTypicalquestionsfacingmanagersrelatedtothistopic:HowshouldwealignISstrategywithbusinessstrategy?HowcanInformationandKnowledgemanagementstrategiesbeintegratedwithISstrategy?WhoshouldberesponsibleforISstrategywithinanorganization?HowcanorganizationsevaluateandcontroltheeffectivenessofISstrategy?WhatisISStrategyDohertyetal.(1999),describeISstrategydevelopmentas: ‘theprocessofidentifyingaportfolioofcomputer-basedapplicationstobeimplemented,whichisbothhighlyalignedwithcorporatestrategyandhastheabilitytocreateanadvantageovercompetitors’.Amoreinformation-centricdefinitionWilson(1989): ‘Aninformationsystemsstrategybringstogetherthebusinessaimsofthecompany,anunderstandingoftheinformationneededtosupportthoseaims,andtheimplementationofcomputersystemstoprovidethatinformation.Itisaplanforthedevelopmentofsystemstowardssomefuturevisionoftheroleofinformationsystemsintheorganization.’Chapterstructure1.Strategicevaluation.WhatisthecurrentstatusofISStrategyandimplementationwithintheorganizationandtheuseofinformationsystemswithinthebroadercompetitiveenvironment?2.Strategicobjectives.WhatspecificallyisanorganizationseekingtoachievethroughISstrategydevelopment?3.Strategydefinition.WhichstrategicapproachesandanalyticaltoolsareavailabletohelpusformulatetheISstrategy?4.Strategyimplementation.HowshouldthestrategybestbeexecutedthroughISprojectstohelpachieveobjectives?ThisiscoveredinChapter7(and8to12)ofBusinessInformationManagement.ElementsofaneffectiveISstrategy–areminder1.Helpsupportthefuturedirectionofanorganization.2.Achieveadvantagefortheorganization(strategicobjectives).3.Definetheallocationofresourcestoachievethisadvantage.4.Beprimarilydrivenbytheneedsoftheorganization,butalsobytheneedsofstakeholderssuchasshareholders,customers,suppliersoremployees.5.Beresponsivetothedynamicenvironmentinwhichanorganizationoperates.OutputsofanISStrategyprocessWardandPeppard(2002)identifythefollowingaskeyoutputsoftheISStrategyprocess:1.IS/ITmanagementstrategy.AnoverallISstrategyfortheorganizationdescribingthecurrentsituation,visionandrationaleforIS-relatedchangeandplans.2.BusinessISStrategies.Inlargerorganizations,thesespecifyhoweachbusinessunitwilluseIS/ITtodeliveritsbusinessobjectives.Thiswillbedefinedatthelevelofapplicationsportfoliosforthebusinessandrelevantinformationarchitectures.3.ITStrategy.PoliciesforthemanagementofspecifichardwareandsoftwareresourcescomprisingtheITinfrastructure.Thisusuallyalsoincludestheprovisionofend-usersupportservicessuchastheIThelp-desk.StrategicInformationSystemsPlanning(SISP) Earl(1995)inareviewoftheSISPliterature,suggeststhatSISPshouldtargetthefollowingareas:1.AligninginvestmentinISwithbusinessgoals;2.ExploitingITforcompetitiveadvantage;3.DirectingefficientandeffectivemanagementofISresources;4.Developingtechnologypoliciesandarchitectures.ITGovernanceCOBITdefinesITgovernanceas: ‘a(chǎn)structureofrelationshipsandprocessestodirectandcontroltheenterprise[useofIT]inordertoachievetheenterprise’sgoalsbyaddingvaluewhilebalancingriskversusreturnoverITanditsprocesses’COBITITGovernanceframeworkFigure6.1COBITITgovernanceframeworkSource:COBIT(2000)COBITexample-Philips PhilipsusedCOBITtoestablishorganizationalcapabilitiesonamaturitylevelbasis,givingaclearindicationofwhereimprovementispossibleandhowtoeffectimprovement.TomaintainitsproactiveapproachtoIT,Philipscontinuestofocuson:

Assessingactualoutcomesoftheprocess(basedonkeygoalindicatorsandmaturitylevels)Identifyingproblemareas(forITprocesseswithlowmaturityscores)Definingbestpractices(definedprocessmaturitylevelandhigher)ImprovingmanagementprocessesandactionsBenchmarkingscoresIScontrolmodelFigure6.2AmodelforcontrollingthecontributionofinformationsystemstoanorganizationSource:BIMInformationsystemsservicesandactivitiesFigure6.3InformationsystemsservicesandactivitiesSource:BIMISactivitiesexamples–theUKNHSFigure6.4InformationsystemsactivitiesfortheNationalHealthServiceInformationAuthoritySource:.ukRequirementsofISStrategyAchievesalignmentofISstrategywithbusinessstrategywhileidentifyingcompetitiveopportunitiesavailablethroughIS.ThesearethetwocoregoalsofanyISstrategyasexplainedatthestartofthischapter.Simplicitythroughwell-definedstages.Theprocessshouldpossessclearlydefined,repeatablestepsorstagesthatcanbeperformedinalogicalorder.SuchsimplicitycanhelpseniorbusinessmanagersworktogetherwithtechnicalITmanagerstodevelopthestrategy.Continuousprocesswithevaluationandimprovementbuilt-in.Itshouldberecognisedthatthestrategydevelopmentprocessisarepeatableprocessthatwillhavestrengthsandweaknesseswhichshouldbeevaluatedattheendofeachplanningcycleandadjustmentsmadeaccordingly.Flexibility.TheprocessshouldenablechangeswithinthebusinessenvironmenttobereflectedinupdatedISplans.ScopeofISStrategyTimescale:Relativelylong-term(2–5years)Relativelyshort-term(6monthsto1year)Orientation:Top-downBottom-upExampleoflong-termISStrategyPhaseBusinessapplication(s)Year1.BasicinternalandexternalcommunicationsSimplecompanyintranet,Internete-mailandcustomer-facingwebsiteYear2.Buy-sidee-commerce–mainsuppliersE-procurementsystemwithtop10suppliersYear3.Sell-sidee-commerce–smallercustomersandbuy-sidee-commerce–smallersuppliersIntroducesimpletransactionalsiteforsmallercustomersRoll-oute-procurementtosmallersuppliersYear4.Sell-sidee-commerce–largercustomersNewcustomerrelationshipmanagementsystemYear5.MobilecommerceOnlineordersfrommobileplatforms.AlertsfromsuppliersTop-downmethodofISstrategydefinition Startswiththebusinessobjectivesandthenassesseswhichinformationsystemscanbeusedtohelpachievetheseobjectives.

Forexample,iftheLo-costAirlineCompanyhasabusinessobjectiveofincreasingthevolumeofrepeatbusinessthroughdevelopingorenhancingacustomerloyaltyscheme,thenISsuchascustomerrelationshipmanagementsystemscanbedevelopedorenhancedtohelpcreatethis.Bottom-upmethodofISstrategydefinitionHeretheselectionoftheISapplicationsportfoliopartiallyorcompletelydeterminestheemphasisofISstrategyandhowitimpactscorporateobjectives.Forexample,differentmanagersintheLo-costAirlineCompanysuchasthemarketingmanager,HRmanagerandE-commercemanagerrequestdifferentsystemsaccordingtotheirowndepartmentalorfunctionalneeds,thenthishelpsdetermineISstrategy.Mini-casestudy–TestValley1 TheneedfortheISstrategyisexplainedasfollows:

‘AnI.S.strategyisawayofsmoothlydirectingthedecisionsthattheCouncilmakesinitsuseofnewtechnology.Thiswillimprovetheservicesthatweprovidetoourcustomers;thepublic,theCouncillorsandeachother.Thestrategyhastoaddressthepresentpositionandproblems,theincreasingdependenceonITbyservices,planforthe“foreseeable”technology,andallowfordevelopmentsthatmayhavenotbeenthoughtofyet.Thereiscertaintythatchangeandnewdevelopmentswilltakeplace.AfunctionoftheI.S.Strategyistoapplycontrolsthatwillfacilitatethemanagementofthesechanges.’Mini-casestudy–TestValley2a.TheExecutive.b.TheInformation&CommunicationsBoard.c.TheManagementTeam.d.TheUserAdvisoryGroup(UAG).e.ISWorkingGroups.f.TheITServicemanagementandstaff.g.InternalAuditSection.Mini-casestudy–TestValley3TheI.S.strategyhasthreemajorcomponents:Technology–Includingoperatingsystems,networkandmobiletechnology.Standards–standardsthataredrivenbylegislation,workingtrendsorbestpractice.Theseincludeapplications.Security–Toensureinformationissafe,accurateandrecoverable.Mini-casestudy–TestValley4Figure6.5OnlinepaymentservicesatTestValleyBoroughCouncilSource:.ukMini-casestudy–TestValley5Figure6.6ComponentsofTestValleyCouncilISStrategySource:.ukApproachestostrategydevelopmentBusinessledMethoddrivenAdministrativeTechnologicalorganizationalEmphasisThebusinessTechniqueResourcesModelsLearningBasisBusinessplansBestpracticeProcedureRigourPartnershipEndsPlanStrategyPortfolioThemesMethodsOursBestNoneEngineeringAnywayNatureBusinessTop-downBottom-upBlueprintsInteractiveInfluencerISplannerConsultantsCommitteesMethodTeamsRelationtobusinessstrategyFixpointsDeriveCriteriaObjectivesLookatbusinessPrioritysettingTheboardMethodrecommendsCentralcommitteeCompromiseEmergeISroleDriverInitiatorBureaucratArchitectTeammemberAgenericISStrategydevelopmentprocessmodelFigure6.7AgenericISstrategydevelopmentprocessmodelSource:Chaffey(2002)OptionsforcontrolofITAppointingIS/ITDirectortotheboard.2.OtherboardmemberultimatelyresponsibleforIS/IT(Sponsor).3.Steeringcommitteeorspecialworkinggroup.4.Businessunitleader.ResearchInsightHowcompanydirectorsperceiveITmanagersTheresearchsuggestedthatcompanydirectorsseeITdirectorsas‘a(chǎn)dvisoryfigures,ratherthanpeoplewhoarequalifiedtomakeimportantdecisionsonspending,accordingtorecentresearch.’HowITmanagersperceivecompanyattitudestoITThesurveyfoundthatIT-relatedissueswerealowpriority(80%agreed)andthiswasattributedtoseniormanagersnotbeingabletocomprehendthelong-termimplicationsoftechnologyissues(41%)agreed.ITManagersasboardmembersITmanagerswereunlikelytobecomeboardmembers.LessthanathirdofUKcompanieshadanITdirectorontheboard.OftheITmanagerssurveyed,only5%thoughtthattheyhadaverygoodchanceofbeingpromotedtotheboardwithinthenextcoupleofyears.SituationanalysisforISInternalorganizationalenvironment.InternalISenvironment.3.Externalmicro-environment(ISperspective).4.Externalmacro-environment(ISperspective).Nolan’sstagesofgrowthmodelFigure6.8Nolan’sstagesofgrowthmodelSource:GalliersandSutherland(1991)Characteristicsofstagesofgrowthmodel1.

Initiation.Thefirstuseofapplicationswithinanorganization.Characterisedbylackofseniormanagementinterest,operationalorsimpleofficesystemsandtransactionalsystemstoreducecosts.2.

Contagion.Widespreaduseofapplicationsasbenefitsaresoughtfromautomationandinformationmanagement.Characterizedbyrapidgrowthinuseofapplicationwithenthusiasmfromdepartmentalmanagers,overallcontrolislimited.3

Control.Thisstageisareactionagainstexcessiveanduncontrolledexpendituresoftimeandmoneyoncomputersystemsfromthecontagionstage.Itischaracterizedbyintroductionofplans,methodologiesandexpenditurecontrols,oftenresultinginanapplicationsbacklog.4 Integration.Thisisareactionagainsttheuseofdepartmentalapplicationsanddatasilosarisingfromearlierpoorcontrol.Traditionallycharacterizedbyuseofdatabases,todaytheuseofmiddlewareandenterpriseresourceplanningsystems.Controlcontinuestoimproveatthisstage.5

Dataadministration.Achangeofemphasistoinformationmanagementratherthanfocusontechnologyandapplications.Databasesanddocument/contentmanagementsystemsintroducedtohelpachievethis.6 Maturity.Informationsystemsareputinplacethatreflecttherealinformationneedsoftheorganization.CharacterizedbyplanninganddevelopmentofIScloselylinkedtobusinessstrategy.StagesinadoptionofdifferentmodelsFigure6.9StagesinadoptionofdifferentmodelsSource:GalliersandSutherland(1991)COBITmaturitymodelLevel0Non-existent.ThereisacompletelackofanyrecognisableITgovernanceprocess.Level1Initial/AdHoc.ThereisevidencethattheorganizationhasrecognisedthatITgovernanceissuesexistandneedtobeaddressed.Nostandardizedprocesses.Level2RepeatablebutIntuitive.ThereisglobalawarenessofITgovernanceissues.ITgovernanceactivitiesandperformanceindicatorsareunderdevelopment.Level3DefinedProcess.TheneedtoactwithrespecttoITgovernanceisunderstoodandaccepted.AbaselinesetofITgovernanceindicatorsisdeveloped,wherelinkagesbetweenoutcomemeasuresandperformancedriversaredefined,documentedandintegratedintostrategicandoperationalplanningandmonitoringprocesses.Level4ManagedandMeasurable.ThereisfullunderstandingofITgovernanceissuesatalllevels,supportedbyformaltraining.Thereisaclearunderstandingofwhothecustomerisandresponsibilitiesaredefinedandmonitoredthroughservicelevelagreements.Responsibilitiesareclearandprocessownershipisestablished.ITprocessesarealignedwiththebusinessandwiththeITstrategy.Level5Optimised.Thereisadvancedandforward-lookingunderstandingofITgovernanceissuesandsolutions.Trainingandcommunicationissupportedbyleadingedgeconceptsandtechniques.Processeshavebeenrefinedtoalevelofexternalbestpractice,basedonresultsofcontinuousimprovementandmaturitymodelingwithotherorganizations.Figure6.10Adoptionstepsofe-businessservicesTheWaybackmachineFigure6.11

TheWaybackmachineSource:

Twoalternativemodelsofthevaluechain:

(a)traditionalvaluechainmodel

(b)revisedvaluechainmodel

Figure6.12Twoalternativemodelsofthevaluechain:(a)traditionalvaluechainmodel(b)revisedvaluechainmodelSource:Chaffey(2004)Figure6.13Fiveforcesmodelwithquestionsthatcanbeaskedtoassesstheimpactofinformationsystemsore-commerceSource:BIMEnhancementstoSainsburysupplychainFigure6.14EnhancementstoSainsburysupplychain

Source:BIMChangesinadoptionofMobilephone,InternetanddigitalTVservicesintheUnitedKingdom1997-2004Figure6.15Changesinadoptionofmobilephone,InternetanddigitalTVservicesintheUnitedKingdom1997-2004Source:E-MORITechnologytracker,/emori/tracker.shtmlSnapshotexampleoftheadoptionoftheInternetfordifferentusesacrossdifferentsocialgroupsFigure6.16SnapshotexampleoftheadoptionoftheInternetfordifferentusesacrossdifferentsocialgroupsSource:BIMCSFsandKPIs Theuseofcriticalsuccessfactors(CSFs)isvaluableinhelpingtoalignnewsystemswithbusinessobjectives. Criticalsuccessfactorsarethosefactorsthatdeterminewhetherbusinessobjectiveswillbeachieved.Keyperformanceindicators(KPIs)arethenusedtosettargetsforCSFsandassesswhetherthesehavebeenachieved. COBITdefinesKPIsas‘theleadindicatorsthatdefinemeasuresofhowwelltheITprocessisperforminginenablingthegoaltobereached’.ExampleBusinessobjectiveCriticalsuccessfactorandKPI.1.ImproveorderfulfilmentShiptotarget.KPI:%systemsthatshipontimeexactlyasthecustomerspecified.2.IncreaseproductperformanceInitialfieldincidentrate.KPI:frequencyofproblemsexperiencedbycustomers.3.EnhancepostsaleserviceandsupportOn-time,first-timefix.KPI:percentageofproblemsfixedonthefirstvisitbyaservicerepresentativewhoarrivesatthetimepromised.SampleCOBITKPIs1.Improvedcost-efficiencyofITprocesses(forexample,costperheadofdeliveringISapplicationsandthereturnoninvestmentofindividualapplications).2.IncreasedutilizationofITinfrastructure(forexample,proportionofstaffusingapplications).3.Increasedsatisfactionofstakeholders(throughsurveysofsatisfactionlevelsandnumberofcomplaints).4.Improvedproductivityofstaff(thisincludesbothISstaff,e.g.numberofsupportcallsansweredandbusinessstaff,e.g.callresolutiontimesinacallcentre).5.Increasedavailabilityofknowledgeandinformationformanagingtheenterprise(thistendstobeanintangiblemeasure,i.e.types

ofinformationavailable,butCOBITrecommendsassessingstandardattributesofinformationqualityi.e.effectiveness,efficiency,confidentiality,integrity,availability,compliance,reliability).Thebalancedscorecard Balancedscorecard Aframeworkforsettingandmonitoringbusinessperformance.Metricsarestructuredaccordingtocustomerissues,internalefficiencymeasures,financialmeasuresandinnovation

Customerconcerns.Theseincludetime(leadtime,timetoquoteetc.),quality,performance,serviceandcost.Internalmeasures.Internalmeasuresshouldbebasedonthebusinessprocessesthathavethegreatestimpactoncustomersatisfaction:cycletime,quality,employeeskills,productivity.Companiesshouldalsoidentifycriticalcorecompetenciesandtrytoguaranteemarketleadership.Financialmeasures.Traditionalmeasuressuchasturnover,costs,profitabilityandreturnoncapitalemployed.Forpubliclyquotedcompaniesthismeasureiskeytoshareholdervalue.Learningandgrowth:innovationandstaffdevelopment.Innovationcanbemeasuredbychangeinvaluethroughtime(employeevalue,shareholdervalue,percentageandvalueofsalesfromnewproducts).ITScorecardcasestudy–BoozAllenHamilton1BoozAllenHamiltoncreatedanITscorecardwithmetricsrelevanttodifferentaudiencessuchascorporateandbusinessunitmanagementandbothseniorandjuniorITstaff.Hedescribestheresultingscorecardas: ‘multi-layered;thetoplayershaverelativelyfewitemsandarefocusedonserviceofferings–theservicesuserswantandarewillingtopayfor.Examplesarecollaborationandcommunication,telephones,orderprocessingandfinancialaccounting.Businessusersfindthehighestlevelsofthescorecardmostuseful.Technologystaffusethescorecard’slowerlayerstotrackthestatusandperformanceofeachserviceofferingandtechnologycomponents,suchase-mailapplications,directoryservices,WANS,LANS,servers,storagesystemsandsoon.’ITScorecardcasestudy–BoozAllenHamilton2Withineachlayerofthescorecard,BoozAllenHamiltondistinguishesbetweenkeyperformanceindicators(KPIs)whichgiveanindicationofeffectiveorefficientdeliveryofITservicesandperformancemeasures(PMs)whicharethereportingmeasuresusedtoassessprogresstodeliveryofKPIs.KPIsincludesalesgrowth,customersatisfactionande-mailavailability.ThecorrespondingPMsaresalesordertotals,thepercentageofsurveyrespondentswhowerefavourableabouttheserviceandthepercentageavailabilityofe-mailservices.Thereare14indicatorsatLevel1,withmoredetailof140measuresatlevel2;around10measuresforeachofthelevel1indicators.Levels1and2arecirculatedtothebusinessunitmanagerseachmonth.Levels3and4focusonthetechnologycomponentsandtherecanbehundredsofdatapointsmanagedthroughoneITmanagerandreviewedmorefrequently.ISStrategydefinedTheISstrategyinvolvessettingrelativeinvestmentprioritiesforapplications,supportservicesandinfrastructure.Theinfrastructureincludesbothhardwareandnetworkarchitecture,butalsoinformationarchitecture(andinformationmanagement).Businessalignment WiththebusinessalignmentapproachtoISstrategydefinition,theselectionoftheapplicationportfolioisdrivenprimarilybythebusinessobjectivesandinformationneeds.

Enterpriseresourceplanningtosupport,forexamplefinancialapplicationsisanexampleofthisapproach.Aproblemwiththealignmentmindset?

ComputerWeekly(2003)reportedthecommentsofJean-LouisPrevidi,directorofresearchatanalystgroupMetawhichsuggeststhedangerofthisapproach.Hesaid:

‘ITdirectorsneedtochangebusinessperceptionsofITasacostcentreorfacehavingtheirITdepartmentsoutsourced.’ HetoldITdirectorstomanagetheexpectationsofthewholeenterpriseandstoptryingtoalignITwiththebusiness,adding: ‘Achieffinancialofficerwillneversayheisaligningfinancewiththebusiness

ITisthebusiness.’ ‘CIOsarechangeagentsfortheenterpriseandshouldspeakintermsofvalue,accountability,financeandreturnoninvestmentacrossthewholebusiness.’TechniquesforintegrationofISwithbusiness1.Directcommunicationusingregularorad-hocmeetingsande-mailedreportsandmemos.2.LiaisonrolessuchaswhenanISpersonisco-optedintotheline-of-businessoperation.3.TemporarytaskforcessuchasanISprojectteam.4.PermanentteamssuchasanITSteeringcommittee.5.IntegratingroleswheretheITpersonmayleadabusinesspro

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