Information Systems Planning

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Information Systems Planning
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IS Planning

• The Changing World of Planning
• Why planning is so difficult
• Traditional vs Sense-and-Respond Approach
• Seven Planning Techniques
• Stages of Growth
• Critical Success Factors
• Competitive Forces Model
• Five Forces Analysis of the Internet
• Value Chain Analysis
• E-Business Value Matrix
• Linkage Analysis Planning
• Scenario Planning

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Paradox

• IS planning is becoming more difficult and more
  important at the same time
• Technology changing so fast Why bother?
• YET
• Most organizations survival is dependant on
  technology
• Good News variety of approaches, tools and
  mechanisms available
• Bad News no best way to go about it

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What is IS Planning?

• Some managers believe determining what
  decisions to make in the future
• Turbulent environment developing a view of the
  future that guides decision making today
• Subtle difference strategy making
• Strategy stating the direction in which you
  want to go and how you intend to get there
• The result of strategy-making is a plan

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What is IS Planning?

• Types of Planning
• Planning is usually defined in three forms, which
  correspond to the three planning horizons.
• Strategic 3-5 years
• Tactical 1-2 years
• Operational 6 months 1 year
• Emphasis on strategy has undergone a definite
  shift in recent years
• Basic trend move from a tactical midrange focus
  to a truly strategic effort

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Types of Planning
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Planning Shift
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Why IS planning is so difficult?

• Business Goals and Systems Plans Need to Align
• Some believe too sensitive PROBLEMS
• Fortunately trend for CIOs to be part of senior
  management
• Technologies Are Rapidly Changing
• Continuous planning?
• Old days of planning at start of year gone
• Advanced technology groups to monitor changes
  adjustments in current decisions

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Why IS planning is so difficult?

• Companies Need Portfolios Rather Than Projects
• Evaluation on more than their individual merit
• How they fit into other projects and how they
  balance the portfolio of projects (Internet Value
  matrix)
• Responsibility Needs to be Joint
• IS planning by CIO no longer effective
• Partnership among CEO, CIO, CFO, COO
• IS PlanningBusiness planning, no longer just a
  technology issue

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Why IS planning is so difficult?

• Infrastructure Development is Difficult to Fund
• Everyone knows infrastructure development is
  crucial, BUT difficult to get funding just to
  develop or improve infrastructure
• Often done under the auspices of a large
  application project
• Challenge develop improved applications over
  time, so that infrastructure improves over time
• Mainframe-client server to share corporate and
  desktop computing
• ERP to centralize and standardize data
• Web presence to give users access to back-end
  systems
• Web services architecture to work intercompany

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Why IS planning is so difficult?

• Other planning issues
• Top-down Vs. bottom-up radical change Vs.
  continuous improvement
• Most organizations have a planning culture into
  which the systems plan must fit

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The Changing World of Planning

• Technology (Internet etc.) introduced speed
  into the business environment and transformed how
  people think about time, how much time they have
  to plan, react to competitors etc.

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The Changing World of Planning

• Traditional Strategy-Making
• Business executives created a strategic business
  plan where the business wanted to go
• IS executives created an IS strategic plan how
  IT would support the business plan
• IT implementation plan created to describe
  exactly how the IS strategic plan would be
  implemented
• Assumptions
• The future can be predicted
• Time is available to do these 3 parts in sequence
• IS supports and follows the business
• Top management knows best (broadest view of firm)
• Company like an Army

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The Changing World of Planning

• The future cannot be predicted discontinuous
  change
• Who predicted Internet, Amazon, eBay etc.? New
  models will appear
• Time is not available for the sequence
• IT implementation plan means IS Dept. already
  late to support business plan it needs to be
  ahead of business strategizing
• IS does not JUST support the business anymore it
  shows IT-based opportunities
• No longer business first, IS second
• At the very least together

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The Changing World of Planning

• Top management may not know best
• Front-line people (closest to customers,
  partners, suppliers) identify opportunities
• Inside out Vs. outside in approach
• An organization is not like an army
• Industrial era metaphor (top-down) no longer
  always applies (e.g. failure of BPR)
• Organizations are living entities do not
  command, but nurture and tender different type
  of leadership required (Semco)

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Todays Sense-and-Respond Approach

• Let Strategies Unfold Rather Than Plan Them
• In times of fast change long term enterprisewide
  strategy (predictions) are risky
• the way to move into the future is step by step
  using a sense-and-respond approach
• Sense a new opportunity and immediately respond
  via testing it
• Myriad of small experiments in parallel
• Formulate strategy closest to the action
• IT (Internet) enabler of communication (inside as
  well as with customers, suppliers and partners)
  So, corporate strategy must be aligned with
  marketplace.
• Strategy development must take place at the
  organizational edges, with employees who
  interact with customers, suppliers and partners
• Employees who are closest to the future (young)
  should become prime strategists. In the Internet
  Age younger employees

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The Changing World of Planning
Figure 4-6
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Todays Sense-and-Response Approach

• Guide Strategy-Making with a Strategic
  Envelope
• Having a myriad of potential corporate strategies
  being tested in parallel could lead to anarchy
  without a central guiding mechanism
• That mechanism is the Strategic Envelope
• Top management doesnt set strategies (as in
  traditional way), it defines the parameters for
  the experiments ( a strategic envelope), and
  then continually manage that context
• Need to meet often to discuss
• Shifts in the marketplace
• How well each of the experiments is proceeding
• Gaining followership or showing waning interest?

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Todays Sense-and-Response Approach

• Manage the strategic envelope by
• Defining a territory
• Holding strategic conversations
• Regular meeting by executives to monitor
  environment and respond
• COO reports on today (size of mobile workforce)
• CIO reports on tomorrow (developments in Web
  Services)
• VP of HR reports on people issues
• Helps to spot trends, launch new projects, add or
  cut funding to existing projects
• Regular meetings with experimenters

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Todays Sense-and-Response Approach

• Be at the Table
• IS executives must be involved in business
  strategising, NOT react to business strategies
  (which is tactical and operational)
• Note first need to make department credible
• Second need to outsource operational work to
  free IS staff for planning
• Test the Future
• IS Dept. needs to test potential futures before
  the business is ready for them (thinking ahead of
  the business), by
• Providing funding for experiments
• Working with research organizations
• Having an emerging technologies group

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Todays Sense-and-Response Approach

• Put the Infrastructure in Place
• Today, moving quickly means having the right IT
  infrastructure in place.
• The most critical IT decisions are
  infrastructure.
• IT experiments must include those that test
  painful infrastructure issues such as how to
• Create and maintain common, consistent data
  definitions
• Create and instil mobile commercial standards
  among handheld devices
• Implement e-commerce security and privacy
  measures
• Determine operational platforms (ERP, Supply
  Chain Management )

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Seven Planning Techniques

• Stages of Growth
• Critical Success Factors
• Competitive Forces Model
• Value Chain Analysis
• E-business Value Matrix
• Linkage Analysis Planning
• Scenario Planning

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Stages of Growth (Nolan and Gibson)

• Stage One Initiation Early successes increase
  interest and experimentation
• Stage Two Contagion Rapid proliferation, little
  planning, much spending learning period
• Stage Three Control Management concerned about
  benefits, so introduces control IS Dept and
  users become accountable Efforts towards
  standardization
• Stage Four Integrationtake advantage of new
  technology to integrate existing systems.
• (Stage Five Data Administration DP function
  created to plan and control use of organizations
  data)
• (Stage Six Maturity IS part of managerial
  processes alignment with business plan.)

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1. Stages of Growth

• The eras overlap each other slightly at points of
  technology discontinuity
• Discontinuity happens when proponents of the
  proven struggle with proponents of the new and
  unproven designs
• Inevitably the new win out
• Importance of this conceptual framework is
  understanding at which stage the org. is a
  precursor of IS planning
• e.g. if use of Web services is in Stage II, too
  much control can kill of new uses of technology
• Management principles differ from stage to stage
• Organization may be in different stages at any
  point in time (i.e. Stage II in terms of planning
  and control, but Stage III in terms of IS
  function organization)

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Critical Success Factors(Rockart)

• Used to identify the information systems that a
  company needs to develop / improve
• Fewer than 10 CSF per executive to monitor
• CSF are time dependent (must be re-examined)
• Four sources
• industry the business is in,
• company itself and situation within industry,
• environment (consumer trends, leveraging the
  Internet),
• temporal organizational factors (too much/little
  inventory)

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2. Critical Success Factors

• Two types of CSFs
• Monitoring CSFs to keep abreast of ongoing
  operations
• Building CSFs to track progress of programs of
  change
• Steps to determine CSFs
• Goals and objectives
• Factors to accomplish these objectives
• 2-3 measures for each factor (most difficult
  part)
• Plan systems to support monitoring of these
  measures

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3. Competitive Forces Model(Porter)

• Threat of new entrants
• Bargaining power of customers and buyers
• Bargaining power of suppliers
• Substitute products or services
• The intensity of rivalry among competitors
• Today, 5 forces and 3 strategies
  enabled/supported by IS.
• Analysis of forces shows which systems to include
  in IS plan.
• HOW DOES THE INTERNET CHANGE THIS?

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Value Chain Analysis(Porter)

• Five primary activities, 4 support activities
• Analyzing the value chain shows
• how a firm can add value to each activity
• determine where an other company can add more
  value and team up with that firm, outsourcing
  that activity to this partner

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4. Value Chain Analysis

• Virtual Value Chains?
• Marketplaces VS Marketspaces
• Marketspaces where information substitutes for
  physical product and location
• How can companies create value in a marketspace?
• How can companies create value in a marketplace
  and marketspace concurrently leveraging off each
  other? (Delta)
• Use Porters Value chain to find the answer

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4. Virtual Value Chains

• In traditional value chains, information is a
  support element, not a source of value in itself
• To compete in the marketspace use information to
  create value for customers (UPS tracking system
  opened up for customers)
• Creating value in the marketspace also involves a
  value chain but here activities are performed
  with information and through information.

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4. Virtual Value Chains

• At every step in the virtual chain value through
  information can be added by
• Gathering information
• Organizing information
• Selecting information
• Synthesising information
• Distributing information

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Virtual Value ChainsEvolution in virtual value
chains

• Making operations visible create ways to see
  physical operations through information. Usually
  visibility of production systems allowing
  employees to coordinate activities in the
  physical value chain, sometimes leading to
  competitive advantage
• Frito-Lays store by store input of sales and
  competitor data to schedule production, local
  promotions. Fast reaction to marketplace changes.
• Foundation for a virtual value chain

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4. Virtual Value ChainsEvolution in virtual
value chains

• 2. Mirroring capabilities
• substitute virtual activities for physical ones
  (e.g. Purchasing through Web-based supply chains)
• Vitual world-wide teams, no time and space
  limitations (e.g. Texas Instruments)

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Virtual Value ChainsEvolution in virtual value
chains

• 3. Space-based customer relationships deliver
  value to the customer in new ways
• Insurance company example
• customer data collected by company made available
  to employees to give advice and quick answers
  (visibility stage)
• Create customer risk profiles and customize
  policies
• New product lines like insurance for boat owners
  (mirroring capabilities)
• Expand to new areas like offering financing for
  boat purchases

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Virtual Value ChainsRULES

• Digital assets are not used up in consumption
  information can be reused in many forms at a low
  cost.
• New economies of scale small companies can
  compete against large ones due to lower overhead
  costs even in large geographic areas
• New economies of scope allow companies to offer
  financing and discount programs
• Transaction costs are lower in the marketspace,
  so companies can capture information they were
  not able to capture in the past (Frito-Lay)

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4. Virtual Value Chains

• Mindshift from
• Supply-driven thinking to demand-driven thinking
• So,
• Sense and respond rather than make and sell
• Significant strategic opportunity for companies
  IS should play a role in identifying it and help
  the company to take advantage of it.

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5. E-Business Value Matrix(Alexander)

• A portfolio planning technique to prioritize
  projects.
• Tool used by Cisco
• Every IT project is assessed in two categories
• Criticality to the business
• Newness of idea
• Each project is placed into one of four
  categories to assess its value to the company
• New fundamentals Low-Lowprovide a
  fundamentally new way of working in overhead
  areas, not business-critical areas (3-6 months)
• Operational excellence High-Lowmedium risk
  because they may involve reengineering work
  processes (no immediate returns rather increase
  corporate agility, customer satisfaction 12
  months)
• Rational experimentation Low-Hightest new
  technologies and ideas (short time frame if
  successful become one of the other 3 types)
• Breakthrough strategy High-Highpotentially have
  a huge impact on the company (eBay, extranets
  shared by partners)

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Linkage Analysis Planning(Primozic and Leben)

• Examines the links organizations have with one
  another to create a strategy for utilizing
  electronic channels
• Steps in the Methodology
• Define power relationships among the various
  players and stakeholders
• Identify who has the power
• Determine future threats and opportunities for
  the company

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6. Linkage Analysis Planning

• Map out your extended enterprise to include
  suppliers, buyers, and strategic partners
• The enterprises success depends on the
  relationships among everyone involved
• Some 70 of the final cost of goods and services
  is in their information content
• Win-win a supplier keeps buyers inventory and
  delivers just-in-time, but gets paid
  electronically upon delivery
• Plan your electronic channels to deliver the
  information component of products and services
• Create, distribute, and present information and
  knowledge as part of a product or service or as
  an ancillary good
• Those who control the electronic channels will be
  the winners

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7. Scenario Planning(Schwartz)

• Scenarios are stories about the way the world
  might be in the future
• The goal of scenario planning is not to predict
  the future, but to explore the forces that could
  cause different futures to take place, and then
  decide on actions to take if those forces begin
  to materialize

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7. Scenario Planning

• Four steps in Scenario Planning
• Define a decision problem and time frame to bound
  the analysis
• How will IS be managed 10 years from now?
• Identify the major known trends that will affect
  the decision problem. Categories are
• Environment, government, regulations, society,
  technology, financial considerations...
• Each trend is judged
• What impact will it have on the decsion
  problem?
• What are the directions of each impact?
• Trends with unknown or contradictory impacts are
  judged as uncertain

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7. Scenario Planning

• Identify just a few driving uncertainties
• Most uncertainties cluster around a few driving
  uncertainties.
• Choose two drivers, with two possible states for
  each 4 scenarios
• Construct the scenarios
• Each scenario is based on a driving uncertainty
• Each scenario must be plausible
• To make it plausible include a triggering event
  (9/11, Enron scandal, major court decision)
• Scenarios show the end state and how we arrived
  at it.

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7. Scenario Planning

• When the scenarios are developed, planners decide
  how their current strategies would fit in each
  case
• Then they ask Is there a better strategy?
• They also identify the factors they should
  monitor closely to spot changes in trends

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CASE EXAMPLEScenarios on the Future of IS
Management

• Four potential futures are presented
• The Firewall scenario could occur if companies
  use traditional forms of management and see their
  data as proprietary
• The Worknet Enterprise scenario could occur if
  companies outsource management of their data and
  share it extensively with specific partners
• The Body Electric scenario could occur if new
  organizational forms flower (such as people
  owning parts of work cells in which they work)
  and obtain all their IT from interconnected
  service providers
• The Tecknowledgy scenario could occur if there
  is an open information society where any kind of
  information is available for a price. The main
  job of IS could be facilitation of knowledge
  processes across organizations

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Scenario Planning
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Conclusion

• Based on the successes and failures of past
  information systems planning efforts, we see two
  necessary ingredients to a good strategic
  planning effort
• IS plans must look towards the future
• Future is not likely to be an extrapolation of
  the past
• Successful planning needs to support peering
  into the future most likely in a
  sense-and-respond fashion
• IS planning must be intrinsic to business planning

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Conclusion

• Sense-and-respond is the new strategy-making mode
• Creating an overall strategic envelope and
  conducting short experiments within that
  envelope, moving quickly to broaden an experiment
  that proves successful
• IS plans typically use a combination of planning
  techniques presented
• No single technique is best and no single one is
  the most widely used in business

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Conclusion

• Peering into an unknown future

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PART I Discussion Case

• IT Strategy
• for
• Royal Dutch/Shell Group

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MICROSOFT Case example Sense and Respond
Strategy-Making

• Abandoned proprietary network despite big when
  it did not capture enough customers
• Moved on to buying Internet Companies as well as
  aligning with Sun to promote Java
• Over time moved into a variety of technologies
• Web, Cable news, Digital movies, Cable modems,
  Handheld OS, Video server, Music, Multiplayer
  gaming
• Not all came from top management e.g. first
  server came from a rebel project
• Getting its fingers into every pie that might
  become important
• Missed some paid later

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SKANDIA FUTURE CENTERS Case example Formulate
Strategy Closest to the Action

• Incubator for testing ideas on IT, social
  relationships, and networking for Skandia, the
  large Swedish insurance company
• Different generations (3G 25, 35, 45)
  collaborate on on-the-edge projects
• In order to talk focus on questions ( dialog)
  rather than answers ( debate)
• Presented as plays (Vs. Report)
• Garden some of the projects are growing
  others not
• Combining senior wisdom with young peoples
  entrepreneurship leads to a real powerhouse

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SHELL OIL Case example Guide Strategy-Making
with a Strategic Envelope

• New GM believed change would only occur if he
  went directly to his front lines (gas station
  employees). Set aside 50 of his time
• Goal not to drive strategy from Corporate
  (tried and failed dismally) but to interact
  directly with the grass roots and support their
  initiatives
• Technique use of action labs (6 to 8 people)
• Week long retailing boot camp, peer challenges,
  hot seats, 60 day plan implementations, report
  back etc.
• Projects spawned many more projects
• Guidance and nurturing came from the top, so that
  there was not complete chaos

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Framework Example Five Forces Analysis of the
Internet

• The Internet tends to dampen the profitability of
  industries and reduce firms ability to create
  sustainable operational advantages because
• It increases the bargaining power of buyers
• Decreases barriers to entry
• Increases the bargaining power of suppliers
• Increases the threat of substitute products and
  services, and
• Intensifies rivalry among competitors
• Recommend focus on your strategic position in
  an industry and how you will maintain
  profitability
• Not growth, market share or revenue

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AN AUTOMOBILE MANUFACTURERCase Example Virtual
Value Chain

• The rental car subsidiary turned to auctioning
  off clean used cars to dealers to sell, via
  marketspace
• Dealers can view the cars (and their stats) to be
  auctioned from a screen in their dealership, and
  then place bids during the online auction, held
  once or twice a month
• The auction saves them time and effort, and the
  cars are guaranteed

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CISCO SYSTEMSCase Example E-Business Value
Matrix

• Ciscos expense reporting system fits in its new
  fundamentals category
• Its executive dashboards are an example of
  operational excellence projects
• Multicast streaming video used for company
  meetings is a rational experiment, and
• Its development of a virtual supply chain is seen
  as a breakthrough strategy

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Electric Power Research Institute Case example
Linkage Analysis Planning

• EPRIs challenge - compress information float -
  elapsed time from availability research findings
  to the use of those results in industry
• Answer EPRINET - a natural language front end
  for accessing online information, expert
  system-based products, e-mail facilities, and
  video conferencing

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