Ch. 4: Planning

1. Ch. 4: Planning • Types of planning: • Strategic • Tactical • Operational planning • Traditional planning • ”Sense-and-Respond” • Case studies

2. 3 planning horizons

3. Traditional strategic planning • Goals, where we want to go • IS plan that support the business plan • Plan for implementing this IS strategy

5. Traditional planning based on: • Foreseeing the future • That we have time to perform the planning • IS supports and follows the organization • That management has the full overview • Hierarchic structure • Our textbook tells us that this is no longer possible because of the Internet. Do we agree?

6. Can we foresee the future? • ”Disruptive” changes can make this impossible: • examples: • Development of the micro processor • Internet/Web • ADSL • Is this the rule or the exception? • Most areas enjoy stability

7. Do we have time for planning? • Internet demand frequent changes • IT-implementation may be lagging behind the business ideas • IT should be ahead • One has to react fast to follow the dot-com development • Is the textbook correct? • Partly, less time for planning and implementation • Do we need much time, with a good infrastructure development time can be reduced • We can make an IT plan at the same time as we make the business plan

8. IT for the dot-com • A platform to develop the business • Makes eBusiness possible • IT must be ahead • Business ideas can be built on IT • Is the textbook correct? • Company dependent • IT is important for many businesses, but not all will become dot-coms • CIO as a part of the executive leadership

9. Enterprise Information Management Model (Benson and Parker)

10. Do management know everything? • Management may be far from the front-line • Big enterprises, many lines of business • Trend towards niche markets • Different strategy for each market • Customers, suppliers and partners are important • ”inside-out becomes ”outside-in” • Textbook correct? • Division leadership becomes important here • In SME the top-management will have this role • But management is always important in strategy work, but we have to employ management at the right level

11. Organizations are not an army! • Modern organizations are flat, not hierarchical • Many BPR projects showed that it was impossible to control big changes from the top. • A new type of leadership: • listen • inspire • make people work together • common goals

12. ”Sense-and-Respond” • avoid one strategy for the whole enterprise • Hydro, Statoil • ”Sense-and-Respond”: • find new possibilities • experiment • under an overall vision and strategy

13. Case: Microsoft • Sense-and-Respond to develop their Internet strategy • Tried their own network as an alternative to AOL (gave up) • Buy Internet companies • Different business areas: • Web-magazine (Slate) • News channel (med NBC) • Digital movies (Dreamworks) • XBOX • But their focus on Internet was a strategic decision

14. Case: Shell Oil • New leader – new ideas • Direct contact with employees at gas stations • Work with grass-root • Action laboratories: • Team from different countries • One week camp • 60 days to develop ideas to be used in their own stations • Discussion, critique • Bottom-up approach • main idea: radical change based on ideas from below

15. Case: Lotus • Sport cars • Nearly broke in 1997 • New leader • Outside consultants • Dramatic improvement in a short time

16. Case: Lotus • Big potential for savings • Established teams, non hierarchic, participants from different divisions • ”quick-wins” (big advantages, little complexity) • Order oriented production • Pay on delivery • Delivery according to plan • Early successes made the team believe in what they were doing • Improved stock handling • more effective production processes (25% reduction) • Saved $4.5 millions in 45 days!

18. Lotus • Both definition and implementation of a strategy is important • Traditionally a ”command and control” firma, with many failed top-projects • Competence at the bottom level (marketing, sales, engineering) • Small teams with many ”action labs” • Non-bureaucratic • examples: development of models for small niches, new service programs • New organizational structure became necessary

19. Seven techniques for the introduction of new technology • Growth analysis • CSF – critical success factors • Analyzing competitive forces • Value chain analysis • Internet value matrix • Linkage analysis • Scenario planning

20. Stages of growth • 1. Early successes • New technology, try and fail, experimentation • 2. Contagion (“infection”) • New products, rapid growth, many applications… • 3. Control • Proliferation must be controlled, standardization. • 4. Integration • Use of technology has reached a mature level

21. CSF (Critical Success Factors) • Focus on management and their information needs • Can help organizations to find the IS systems they need • CSF let each manager define 10 critical factors • Sources: • Industry • The company • Environment (market trends, economy, regulations,…) • Temporal organizational factors (too much, too little inventory)

22. Competing forces • Michael Porter • Potential entrants • Bargaining power of buyers • Bargaining power of suppliers • Substitute products and services • Rivalry among existing firms

24. Mini exercise: SAS • Discuss the competitive situation for SAS based on Porter’s ideas

25. Strategies to meet competition • Porter: • Specialization • Cheapest producer (Ryan Air) • Find a niche • However: • Improve the situation by forcing competitors out of the market

26. Value chain analysis • Inbound logistics • Operations (converts inputs to products and services) • Outbound logistics • Marketing and sales • Service • 4 supporting activities (next page)

27. Value chain analysis

28. Virtual value chains • Marketplaces: (physical products) • Marketspaces: (virtual products) • Both: Brick&click • Information can be a product in itself (account information, insurance, whereabouts of packets in the postal system) • Virtual value chain where information is flowing through the chain

29. Virtual assembly line Virtual Product Specifications Virtual product Virtual product “as built” description Refined virtual product Virtual “assembly line” New Virtual product Production data Production data Service data Physical assembly line Finished product

30. eBusiness value matrix • Used by Cisco and others to prioritize projects (”portfolio management”) • Look at: • ”Fundamentals” – Internal, new ways of performing processes, 3-6 months perspective • ”Operational Excellence” - reengineering, improved quality, more satisfied customers. • ”Rational Experimentation” • ”Breakthrough Strategy”, potential huge effects, established as a separate unit/company, venture capital, big risks

31. Case: Cisco • Components for data networks • New Fundamentals: • reporting system, e.g., travel expenses, Web-based, routed to manager • Operational Excellence: • Web based information system (”dashboard”) for management • Rational Experimentation: • continuous experimentation • ”streaming video”, on-line meetings, etc. • Breakthrough Strategy: • virtual value chain • Only 5 of 26 factories are owned by Cisco • an effective value chain necessary to adjust to market demands

32. Linkage analysis planning • Linkage to other organizations • Strategy to use electronic channels • Steps: • Define linkage to all important actors • Include customers, partners, etc • Plan for use of eChannels

33. Case: Electric Power Research Institute • Consultant and research organization, 700 customers (power plants), 350 employees, 1600 projects) • Task: Present research results for the 400.000 member employees • Problem: Costly, to long time to reach customers • eChannel: • Expert system with a natural language interface • Email and Video-conference system • Linkage analysis: • Partners (universities, …) • Customers (members, …) • Possible changes (partners becoming competitors) • System to handle all parts