Chapter

11

Developing Business/IT
Strategies

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights

Learning Objectives
Discuss the role of planning in the business
use of information technology, using the
scenario approach and planning for
competitive advantage as examples
Discuss the role of planning and business
models in the development of business/IT
strategies, architectures, and applications
Identify several change management
solutions for end user resistance to the
implementation of new IT-based business
strategies and applications
11-2

Planning Fundamentals
Information technology has created a
seismic shift in the way companies do
business
Just knowing the importance and structure of
e-business is not enough
You must create and implement an action
plan that allows you to make the transition
from an
old business design to a new e-business
design
11-3

Case 1: Forrester, NMSU, Exante

Financial Services, and Others
The alignment between business and IT strategy is
crucial to business success; sometimes it is IT that
makes it happen.
For most CIOs, putting together an IT strategic plan
which helps to improve the business-IT relationship
is very important.
Businesses may not have a clear strategy or they
may have some strategies, but they may not apply
to all the business activities taking place.
IT can help the business articulate how IT fits into
business and influence overall business strategy.
11-4

Case Study Questions

1. Consider statements made in the case about business often
not having an overarching business strategy that can serve
as guidance for the development of a strategy for IT. How is
it possible that companies get by without some sort of
stable and clear direction? What does this tell you about the
business and industry environment in which they operate?
2. Dave Aron of Gartner notes that in some cases the lack of
clear business strategy provides an opportunity for IT
leaders to step in and help articulate it and the role IT will
play in the new strategy. This sounds like a good thing for IT
people. What is the downside of being in this situation?
3. Why do you think ITs success is dependent on the overall
business strategy of an organization? Why must they be
tied together? Provide several reasons.
11-5

Components of Organizational Planning

11-6

Planning
Strategic Planning
Deals with the development of an
organizations mission, goals, strategies, and
policies
Begins with strategic visioning questions

Tactical Planning
The setting of objectives and the
development
of procedures, rules, schedules, and budgets

Operational Planning
Done on a short-term basis to implement
and control day-to-day operations
11-7

Strategic Visioning Questions

11-8

The Scenario Approach

Gaining in popularity as a less

formal, but more realistic, strategic
planning methodology
Teams of managers and planners
participate in microworld or virtual world
exercises
Business scenarios are created and
evaluated
Alternative scenarios are then created
11-9

Trends that Affect Strategic Planning

11-10

Planning for Competitive Advantage

Strategic business/IT planning
Involves evaluating the potential benefits
and risks of using IT-based strategies and
technologies for competitive advantage

The following models can help generate

ideas for the strategic use of IT to
support initiatives
Competitive forces
Competitive strategies
Value chain
11-11

Strategic Opportunities Matrix

11-12

SWOT Analysis
SWOT stands for
Strengths: a companys core competencies
and resources
Weaknesses: areas of substandard
business performance compared to others
Opportunities: potential for new business
markets or innovative breakthroughs that
might expand current markets
Threats: anything that has the potential for
business and market losses
11-13

Business Models and Planning

Business model answers vital

questions about the 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?
11-14

Questions for all Business Models

Customer value Are we offering something
distinctive or at a lower cost
than our competitors?
Scope

To which customers is this value

being offered?
What range of products/services
offered embody this value?

Pricing

How do we price the value?

11-15

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 each
market, and what drives them?
What drives value in each source?

Connected
activities

What do we have to do to offer this

value and when?
How connected are these activities?

11-16

Questions for all Business Models

Implementation What structure, systems, people, and
environment do we need to carry out
these activities?
What is the fit between them?
Sustainability

What is it about the firm that makes

it difficult for other to imitate it?
How do we keep making money?
How do we sustain our competitive
advantage?

11-17

Questions for all Business Models

Capabilities

What are our capabilities and

capabilities gaps?
How do we fill these gaps?
Is there something distinctive about
these capabilities that lets us offer
the value better than other firms?
Is this capability hard to imitate?
What are the sources of these
capabilities?

11-18

Questions Specific to E-Business Models

Customer
Value

What is it about Internet technologies

that allows us to offer customers
something distinctive?
Can Internet technologies help us
to solve a new set of problems for
customers?

Scope

What is the scope of customers that

Internet technologies enable us to
reach?
Does the Internet alter the product or
service mix that embodies the firms
products?
11-19

Questions Specific to E-Business Models

Pricing

How does the Internet make pricing

different?

Revenue source Are revenue sources different with

the Internet?
What is new?
Connected
activities

How many new activities must be

performed as a result of the Internet?
How much better can Internet
technologies help us perform
existing activities?
11-20

Questions Specific to E-Business Models

Implementation How do Internet technologies affect
the strategy, structure, systems,
people, and environment of the firm?
Capabilities

What new capabilities do we need?

What is the impact of Internet
technologies on existing capabilities?

Sustainability

Do Internet technologies make

sustainability easier or more difficult?
How can the firm take advantage
of it?
11-21

Business Models as Planning Tools

A business model forces rigorously and
systematic thinking about the value and
viability of business initiatives
The strategic planning process is then used
to develop unique business strategies that
capitalize on a business model
The goal is to gain a competitive advantage
in an industry or marketplace

11-22

The Business/IT Planning Process

11-23

The Business/IT Planning Process

The business/IT planning process

has three major components
Strategic development
Resource management
Technology architecture

11-24

Information Technology Architecture

The IT architecture is a conceptual

design that includes these major
components
Technology platform
Data resources
Application architecture
IT organization

11-25

Balanced Scorecard
The balanced scorecard measures a
companys activities in terms of vision
and strategies
The system has four processes
Translating vision into operational goals
Communicating the vision and linking it
to individual performance
Business planning
Feedback/learning and strategy adjustment
11-26

Balanced Scorecard
The business perspectives a scorecard
measures
Financial: reflects financial performance,
such as cash flow or ROI
Customer: measures having a direct impact on
customers, such as time to process phone calls
Business process: reflects the performance of key
business processes, such as time spent prospecting
or process costs
Learning/growth: the companys learning curve,
such as how many hours are spent training staff

11-27

Identifying Business/IT Strategies

The most valuable Internet

applications allow companies to
Transcend communication barriers
Establish connections that enhance
productivity
Stimulate innovative development
Improve customer relations

11-28

Strategic Positioning Matrix

11-29

Strategic Matrix
Cost and Efficiency Improvements
Use the Internet as a fast, low-cost way to
communicate and interact with others
Use of e-mail, chat systems, discussion
groups, and company websites

Performance Improvement in
Effectiveness
Major improvements in business effectiveness
recommended
Increase use of Internet-based technologies,
such as intranets and extranets
11-30

Strategic Strategies
Global Market Penetration
Capitalize on a high degree of customer and
competitor connectivity and use of IT
Use e-commerce websites with value-added
information services and extensive online
customer support

Product and Service Transformation

Develop and deploy new Internet-based
products and services that strategically
reposition it in the marketplace
11-31

E-Business Strategy Examples

Market Creator: be among the first to
market
and remain ahead of the competition by
continuously innovating
Channel Reconfiguration: use the
Internet
as a new channel to directly access
customers, make sales, and fulfill orders
Transaction Intermediary: Use the
Internet
to process purchases
11-32

E-Business Strategy Examples

Infomediary: use the Internet to reduce the
search cost; offer a unified process for
collecting the information needed to make a
large purchase
Self-Service Innovator: provide a
comprehensive suite of services that the
customers employees can use directly
Supply Chain Innovator: use the Internet to
streamline supply chain interactions
Channel Mastery: use the Internet as a sales
and service channel

11-33

Business Application Planning Process

11-34

Comparing Planning Approaches

11-35

E-Business Architecture Planning

11-36

Implementation

Many companies plan changes very well

Few manage to convert a plan into action
This is true even if senior management
consistently identifies e-business as an
area of great opportunity
11-37

Case 2: Blue Cross and Blue Shield and

Others

Implementing changes needed by new information systems in an

organization is very challenging as employees resist change .
Understanding the science behind change and resistance to
change can lead to more effective approaches to foster
involvement and smooth out transitions to new systems.
One of the biggest mistakes managers make is assuming that
everyone is motivated by ambition. Many people are motivated
as much or more by the work they do as they are by the
opportunity to move up in the hierarchy.
One way to manage change is through education and training.
Employees accept change if they are provided proper education
and training on the new system that is being implemented.

11-38

Case Study Questions

1. Although a very detailed change proposal may prevent people
from making their own connections, as discussed in the case, it
may lead others to consider the proposal to be vague and
unfinished. How do you balance these two concerns? What
guidelines would you use to ensure that you are not veering too
far off in either direction?
2. Kevin Sparks of Blue Cross and Blue Shield of Kansas City had
a difficult time convincing his people of the need for change.
What would you have suggested that he should do before you
read the case? What about afterwards? How did your
recommendations change as a result?
3. Organizational change goes beyond promotions and the threat
of layoffs. What ways other than those discussed in the case
would you use to entice people to embrace proposed changes?
Provide several suggestions and justify their rationale.
11-39

Implementing Information Technology

Many businesses have undergone multiple
major 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

11-40

Impact and Scope of Implementing IT

11-41

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
11-42

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
11-43

End User Resistance and Involvement

Any way of doing things generates some
resistance from the people affected
CRM projects have a history of failure
Up to 75 percent of CRM projects fail to
meet their objectives
This is often due to sales force automation
problems and unaddressed cultural issues
Sales staffs are often resistant to, or fearful
of, using CRM systems
11-44

Keys to Solving End User Resistance

Keys to solving end user resistance
problems
Education and training
End-user involvement in organizational
changes and system development
Requiring involvement and commitment of
top management and all stakeholders

Systems that inconvenience or frustrate

users cannot be effective, no matter how
technically elegant or efficient
11-45

Obstacles to KM Systems

11-46

Change Management

People factors have the highest level

of difficulty and the longest time to
resolve of any dimension of
change management
11-47

Key Dimensions of Change Management

11-48

Change Management
Implementing a new e-business
application may involve
Developing an action plan
Assigning managers as change sponsors
Developing employee change teams
Encouraging open communications and
feedback about organizational changes

11-49

Change Management
Key tactics recommended by change experts
Involve as many people as possible in e-business
planning and application development
Make constant change an expected part
of the culture
Tell everyone as much as possible about everything,
as often as possible, in person
Make liberal use of financial incentives and
recognition
Work within the company culture, not around it

11-50

A Change Management Process

11-51

Avnet Marshalls Transformation

11-52

Case 3: 7-Eleven Japan, Eli Lilly, Mohegan

Sun, UPS, Vanguard, Carlson Companies, and
Raytheon
7-Eleven blends its IT investments with a
range of assertive IT practices and
capabilities
Counselor visits to stores twice a week
Delivers of stock three times a day
A transparent information infrastructure
that links 70,000 computers at stores,
headquarters, and supplier sites

11-53

Case 3: 7-Eleven Japan, Eli Lilly, Mohegan Sun,

UPS, Vanguard, Carlson Companies, and
Raytheon

MIT identified four broad classifications

of IT investments that can be managed
as a portfolio to minimize business risk
and optimize return
Transactional: used to cut costs or increase
throughput for the same cost
Informational: provide information for
accounting, reporting, compliance,
communication, or analysis
11-54

Case 3: 7-Eleven Japan, Eli Lilly, Mohegan Sun,

UPS, Vanguard, Carlson Companies, and
Raytheon
Strategic: used to gain competitive
advantage by supporting entry into
new markets or by helping to develop
new products, services, or business
products
Infrastructure: typically aimed at
providing a flexible base for future
business initiatives or reducing longterm IT costs via consolidation
11-55

Case Study Questions

1. What is the portfolio management approach to IT
planning? Use the four classifications of IT
investments and examples of companies in this
case to illustrate your answer.
2. What are the keys to 7-Eleven Japans great
success compared to other retailers in Japan? How
does IT support such success? How could 7-Eleven
Japan do even better? What role would IT play?
Defend your proposal.
3. Compare the IT portfolio investment approaches of
Eli Lilly, Carlson Companies, and Raytheon. What
differences in investment approaches and strategies
do you find? Which approach do you prefer? Why?
11-56

Case 4: Infosys Technologies

Infosys has a long history of trying to leverage

knowledge created by its employees for corporate
advantage.
The incentive system they created to encourage
employees to contribute their knowledge created
more problem than the management anticipated.
Eventually Infosys had to change their incentive
system.
Knowledge management requires much more than
technology.
11-57

Case Study Questions

1. Why do you think the knowledge
management system at Infosys faced such
serious implementation challenges? Defend
your answer with examples from the case.
2. What steps did the KM group at Infosys take
to improve participation in the KM system?
Why were some of these initiatives
counterproductive? The KM group
responded with corrective initiatives. Do you
think these will succeed? Why or why not?

11-58

Case Study Questions

3. What change management
initiatives should the KM group have
initiated at Infosys before attempting
to develop and implement
knowledge management at the
company? Defend your proposals,
paying particular attention to the
final quote in the case by a long-time
KM manager at Infosys.
11-59