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Frameworks for: Integration of IS and Business Strategies (Planning frameworks) Strategic Alignment 1 Frameworks for Integration of IS and Business Strategies-Planning f/works 6.1 DEFINITION OF A FRAMEWORK AND ITS CONTENTS A framework is a basic conceptual structure used to solve a complex issue. Frameworks contain Methodologies. Methodology is defined as "the analysis of the principles of methods, rules, and postulates employed by a discipline" or "the development of methods, to be applied within a discipline" "a particular procedure or set of procedures". A Methodology includes the following concepts as they relate to a particular discipline or field of inquiry: a collection of theories, concepts or ideas; comparative study of different approaches; and critique of the individual methods 2 Methodology continued Methodology refers to more than a simple set of methods; rather it refers to the rationale and the philosophical assumptions that underlie a particular study. This is why scholarly literature often includes a section on the methodology of the researchers. A methodology must contain at least the following four elements: A structure that gives guidance on what to do, and when to do it. A definition of techniques to do what needs to be done Advice on how to manage the quality of the results Tools to automate the process. Methodology will consist of tasks. Each task is completed by using techniques. There must be a set of deliverables. 3 6.2 PURPOSE OF FRAMEWORKS The IS strategy is the outcome of the IS strategy planning process and having a framework for that process helps the organization avoid getting bogged down in inappropriate detail. 6.3 CLASIFICATION OF PLANNING FRAMEWORKS Frameworks for planning may be classified by: 1. Intention of framework. This is further classified as: Business Impacting or Business Aligning 2.Nature of the planning environment. This is further classified as: Social- technical Developmental 3. Nature of the Planning process Top-Down, Bottom up Eclectic, Innovative 4 Intention of framework 6.3.1.1 Business Impacting Bergeron, Buteau and Raymond (1991) suggested the following impact planning techniques- covered earlier: Competitive forces (Porter, 1979 and McFarlan (1984)). Competitive strategies: (Porter, 1980) Value chain: (Porter, 1985 and Rackoff (1985)). Consumer resource life : Ives and Learmonth 1984 Impact of IS/IT: Parsons 1983 Strategic opportunities: Benjamin (1984) These techniques aim to determine which IS strategy to adopt in order to impact positively on the business. 5 6.3.1.2 Business Aligning The three most widely used techniques include Critical success factor analysisBusiness systems planning Strategy set transformation -- Strategic set transformation King (1978) Earl’s strategic alignment model (To be covered here below) 6 6.4 Alignment Problem Traditionally assumed purpose of strategic alignment is to align IT with corporate or business strategies Problems with this assumption: Supposing corporate or business strategies don’t exist! What if IT drives the organization’s strategy e.g. in information intensive firms like banks? We use Extended strategic alignment model by Earl Info. needs drive the alignment process Central to alignment is corporate strategy and existing IS supporting the organization (IS map) Info. needs are met via business domain (business strategy & business organization) and IS domain (IS strategy & IS infrastructure & resources) interacting to support the organization THUS parallel development of IS and business strategy is driven by info. 7 needs 6.5 Earl’s strategic alignment model Used in Strategic Alignment Process and is based on the 5 stages of IS planning proposed by Earl: Stage 1 of IS planning Planning context: inexperience in IS planning, unawareness of importance of IS Task: mapping of IS resources to assess the coverage and quality of technology and applications (IS/IT mapping) Objective: greater management understanding Methodology: survey of existing IS (bottom-up) Direction/involvement: led by DP/IT Once there is confidence in assessing IS, attention moves to analyzing business needs as the driver for IS (stage 2) 8 Stage 2 Planning context: inadequate business plans for the purpose Task: business direction Objective: agreeing priorities Methodology: driven by business strategy (top-down) Direction/involvement: led by senior management Stage 3 Brings together stages 1 & 2 into a coherent IS strategic planning approach. Planning context: apparent complexity Task: detailed planning Objective: firming up the IS strategic plan Methodology: matching top-down and bottom-up outputs plus investigations and prototypes Direction/involvement: users and IS staff involved 9 Stage 4 The competitive advantage stage. Most organizations aspire to get to this stage but few make it! Even when achieved, few sustain it! Planning context: impatience, especially with detailed and formal planning processes Task: competitive advantage Objective: finding business opportunities occasioned by developments in IT or seeking opportunities afforded by IT which may yield competitive advantage or create new strategic options Methodology: inside-out processes (IS strategy linked to what the business could do) – requires “bright sparks” & powerful “champions” & an environment that encourages innovation and working around normal rules Direction/involvement: executive management and users. Note the absence of IS – Often IS has moved to executive management 10 Stage 5 For the most successful organizations. IS and corporate strategy are integrated within a participative environment encompassing users and managers within the organization. Planning context: maturity in IS strategic planning Task: IT strategy connection Objective: integrating IS and business strategies Methodology: multiple methods accepted (combination of stages 1-4 methods) Direction/involvement: partnership of users, general management and IS 11 Notes on IS mapping: Useful only as an aid to thinking about the strategy process The IS map in any organization will be a complex mixture of all the stages: the purpose of mapping is to attempt to map this complexity However, the understanding implicit in earlier stages is important to being able to successfully undertake later stages 12 6.6 The Business & IS Domain Business domain consists of business strategy and the business organization or infrastructure IS domain consists of IS strategy and IS infrastructure & processes All elements of business & IS domains are continuously aligned (all elements dynamic) around corporate strategy and IS map; and in satisfaction of the overall information need Strategic alignment process consists of 2 stages: determining an alignment perspective undertaking the alignment process 13 6.7 The Alignment Perspectives Perspective builds from the position determined by IS mapping (i.e. IS mapping used to determine alignment perspective) & looks at how strategic alignment can be pursued given the organizational context 1. Strategy execution: Driver: business strategy – organizational design and IS are adapted to the changing business strategic needs Role of top management: strategy formulator Role of IS management: strategy implementer Performance criteria: cost/service centre Problem: supposing the current organizational design & available choices of IS infrastructure to support business needs are so constrained that the strategic vision is unattainable? 14 Strategy execution perspective Business strategy Business Organization Driver Role of top management Role of IS management Performance criteria Business strategy Strategy formulator Strategy implementer Cost/service center IS Infrastructure and process 15 2. Technology potential: Similar to strategy execution but without the same constraints Focuses on available technologies and infrastructure necessary to their success, with business organization & strategy following the technological lead Aim: to identify the best IS and organizational configurations needed to implement the chosen strategies – assumes the organization has the necessary flexibility to achieve these (e.g. change business org.) Driver: business strategy Role of top management: technology visionary Role of IS management: technology architect Performance criteria: technology leadership 16 Technology Potential IS strategy Business strategy IS infrastructure and process Driver Role of top management Role of IS management Performance criteria Business strategy Technology visionary Technology architect Technology leadership 17 3. Competitive potential: Aim: to exploit emerging IT capabilities to generate competitive advantage, either by enhancing products or by improving processes, with business strategy being modified to take advantage of new opportunities Driver: IS strategy Role of top management: business visionary Role of IS management: catalyst Performance criteria: business leadership Problem: may often fail to deliver anticipated benefits, esp. if the focus is on IT rather than IS resources in general 18 Competitive Potential Business strategy IS strategy Driver Role of top management Role of IS management Performance criteria IS strategy Business visionary Catalyst Business leadership Business Organization 19 4. Service level: Aim: improved organization through IS strategy and IS infrastructure and resources Driver: IS strategy Role of top management: prioritizer Role of IS management: executive leadership Performance criteria: customer satisfaction Problem: may become detached from business strategy and loose focus Summary Info needs is driver of IS strategy IS strategic alignment is a continuous process of aligning business domain with IS domain in accordance with corporate strategy and organization’s IS map 20 Service level perspective Driver Role of top management Role of IS management Performance criteria Business Organization IS strategy Prioritiser Executive leadership Customer satisfaction IS strategy IS infrastructure and process 21 6.7 Undertaking the Strategic Alignment Process Iterative process of info. needs analysis and aligning business & IS domains in satisfaction of those needs 1. Information needs analysis: Aim: to assess info. needs in relation to both internal & external organizational environments EE: use PEST (Politics, Economic, Sociology and Technical Developments) and SWOT (see earlier module) IE: aim is to determine the balance of culture and structure (see earlier module on analysis of values and objectives) – see also case of structure/culture conflict EE & IE analysis should be participatory – in order to gain and improve understanding within the organization 22 The Process of Strategic Alignment Information needs analysis Information systems domain Business Domain Business strategy IS infrastructure and processes Business organization IS and IT strategy 23 The structure for corporate information 24 2. The business domain: Use Porter’s value chain analysis (see earlier module) with the following perspective: IS provide the links between the primary activities and the means of ensuring that secondary activities are used to their full advantage e.g. firms using JIT manufacturing systems, procurement, inbound logistics & operations are linked by technology-based systems, which ultimately control the whole manufacturing process Corporate strategy is also taken into consideration here Care must be taken to ensure that business domain analysis fits the structural and cultural issues raised by 25 the information needs analysis Using Porter’s Value Chain in Business Domain Analysis The primary tool for analysing a company's internal business domain is Porter's value chain. Administration & Infrastructure Human resource management Product/ Technology/ Development Procurement Inbound logistics Operations Value Added Cost = MARGIN Outbound Sales & Services marketing logistics Porter casts the value chain as an integrated model, rather than as a collection of functional areas. 26 3. The IS domain: Analysis of IS infrastructure and resources starts with strategic grid – compares current & potential IS applications according to their current and future value (see figure) – similar to BCG matrix on product Strategic grid used to map IS applications & hence to gain an understanding of role of IS applications. It also implies changes required for applications that are not having an impact Applications move round the quadrants e.g. entering in Turnaround or Strategic and moving until Support Applications in Support selectively divested & replaced with those from emerging & pacing quadrants (see fig.) 27 Using the Strategic Grid for IS Domain Analysis Strategic Critical to the business and of the greatest potential value Essential for primary processes High Potential Potential value high but not confirmed Needed to support the business but of little strategic value Factory Support The strategic grid Source: McFarlan (1989) 28 Problem: Organizations hanging onto dying systems, e.g. because of resistance to change. IT has a life cycle close to that of IS applications: Phase 1 - start with untried technology (development – turnaround) Phase 2 – major competitors sample it (development/growth – strategic) Phase 3 – all organizations are using it – none can survive without it (growth/maturity – factory) Phase 4 – keeping the technology is a liability – become uncompetitive (decline – support) (see fig.) Plot a life cycle for PC operating systems or a popular RDBMS NB – if promised potential is not realizable, org. must 29 get rid of particular IT (can be very expensive!) The Technology Life Cycle 30 Uses of the strategic grid: Helps identify IS resource allocations on the basis of business importance Gives a snapshot of the status & role of IS now and in the future and makes this role explicit – a vital part of IS strategic planning Helps match existing technologies against applications and to plan for future technologies (tech. impl. grid) Emerging technologies being used for systems which have high potential (Turnaround) but which are not critical to business, and must be monitored carefully until a decision to utilize them can be made Pacing technologies (Strategic/Turnaround) should be invested selectively for applications in which competitors are investing. Aim is to decide those likely to become Key and use them to build Strategic/Factory systems and selectively 31 divest from Base technologies Technology Implementation Grid 32 Weaknesses of the strategic grid: Originally used to determine the required level of senior mgnt attention in managing IS – but has been used for many IS strategic issues. For strategic IS planning, it has the following weaknesses: Leaves the strategic value of IS as something to be assessed after the fact Cannot model the situation when an organization is aware of the strategic importance of IS but has no current or planned IS applications This (latter) may however be solved by using CSFs (another top-down IS planning tool) – determines priority IS requirements whether the IS exists or is planned for 33 Summary of objectives of IS domain analysis: To conduct internal and external audits to determine the current position regarding IS applications and the technology to support them (valuable tools include the strategic grid and technology implementation grid) To classify the business value of IS applications using the strategic grid To determine the available technologies, categorized as emerging, pacing, key or base To match current IS applications and technologies to those available 34 4. Summary of strategic alignment action: Strategic IS alignment is an integral part of the process of aligning corporate, business and IS domains all driven by information requirements Alignment process is iterative and participative A combination of tools should be used 35