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Frameworks for: Integration of IS and Business Strategies (Planning frameworks)

Frameworks for: Integration of IS and Business Strategies (Planning frameworks) Strategic Alignment. Frameworks for Integration of IS and Business Strategies-Planning f/works. 6.1 DEFINITION OF A FRAMEWORK AND ITS CONTENTS

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Frameworks for: Integration of IS and Business Strategies (Planning frameworks)

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  1. Frameworks for: Integration of IS and Business Strategies (Planning frameworks) Strategic Alignment

  2. 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

  3. 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.

  4. 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

  5. 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.

  6. 6.3.1.2 Business Aligning • The three most widely used techniques include • Critical success factor analysis- • Business systems planning • Strategy set transformation -- Strategic set transformationKing (1978) • Earl’s strategic alignment model (To be covered here below)

  7. 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. needs

  8. 6.5 Earl’sstrategic 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)

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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 • 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?

  15. Driver Role of top management Role of IS management Performance criteria Business strategy Strategy formulator Strategy implementer Cost/service center Business strategy Business Organization IS Infrastructure and process Strategy execution perspective

  16. 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

  17. 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 Technology Potential

  18. 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

  19. Business strategy IS strategy Driver Role of top management Role of IS management Performance criteria IS strategy Business visionary Catalyst Business leadership Competitive Potential Business Organization

  20. 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

  21. Driver Role of top management Role of IS management Performance criteria IS strategy Prioritiser Executive leadership Customer satisfaction IS strategy IS infrastructure and process Business Organization Service level perspective

  22. 6.7 Undertaking the Strategic Alignment Process • Iterative process of info. needs analysis and aligning business & IS domains in satisfaction of those needs • 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

  23. Information systems domain IS infrastructure and processes IS and IT strategy Information needs analysis Business Domain Business strategy Business organization The Process of Strategic Alignment

  24. The structure for corporate information

  25. 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 the information needs analysis

  26. Administration & Infrastructure Human resource management Value Added - Cost = MARGIN Product/ Technology/ Development Procurement Operations Sales & marketing Services Inbound logistics Outbound logistics 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. • Porter casts the value chain as an integrated model, rather than as a collection of functional areas.

  27. 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.)

  28. Using the Strategic Grid for IS Domain Analysis The strategic grid Source: McFarlan (1989)

  29. 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 get rid of particular IT (can be very expensive!)

  30. The Technology Life Cycle

  31. 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 divest from Base technologies

  32. Technology Implementation Grid

  33. 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

  34. 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

  35. 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

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