Week 3 Monday, February 6

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Week 3Monday, February 6

• Strategic Alignment
• Business Networks

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Strategic Alignment

• Alignment between the business and IT strategies
• Alignment between strategy and capabilities

Business
IT
Strategy
Strategy
Value

• IT infrastructure
• Technology IT infrastructure
• Human IT infrastructure

Capabilities
Capabilities
Including infrastructure
Including infrastructure
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Porters Five Forces ModelForces that Shape
Strategy
?
How will the business react to threats (and
opportunities)?
Potential Entrants
Threat of new entrants
Industry Competitors
Bargaining power of buyers
Bargaining power of suppliers
Customers and Buyers
Suppliers
?
?
?
Rivalry among existing firms
Threat of substitute products or services
?
Substitutes
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Strategy and Threats
Threats
Opportunities
Strategy
How does the business capitalize on its threats?
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Strategic Information Systems Planning (SISP)

• Definition... a process conducted within the
  contexts of scope, perspective, time frame, and
  level of abstraction, with any or all of the
  following agenda (1) supporting and influencing
  the strategic direction of the firm through
  identification of value-adding computerized
  information systems, (2) integrating and
  coordinating various organizational technologies
  through development of holistic information
  architectures, and (3) developing general
  strategies for successful systems
  implementation. Segars, Grover and Teng.1998

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SISP Progression
Architectures for sharing organizational and
interorganizational data and integration
technologies
Enabling initiatives for gaining competitive
advantage
Alignment of IS strategy with corporate
strategy
IS viewed as strategic resource
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Context Characteristics of SISP
Scope (broad)
Strategic Information Systems Planning
Perspective (upper management)
Time Frame (long range)

• Supporting and influencing the strategic
  direction of the firm through identification of
  value-adding computerized information systems
• Integrating and coordinating various
  organizational technologies through development
  of holistic information architectures
• Developing general strategies for successful
  systems development

Level of Abstraction (conceptual)
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Six Process Dimensions
Comprehensiveness
Formalization
Focus
Planning Effectiveness
Coalignment
Flow
Participation
Favorable coalignment will lead to effective
planning
Consistency
Alignment of dimensions
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1. Comprehensiveness

• Thoroughly canvassing a wide range of
  alternatives
• Surveying a full range of objectives
• Carefully weighing the costs and risks of various
  consequences
• Intensively searching for information to evaluate
  alternative actions
• Objectively evaluating information or expert
  judgment regarding alternative actions
• Re-examining the positive and negative
  consequences of all known alternatives
• Making detailed plans, including consideration of
  contingencies, for implementing a chosen action

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2. Formalization

• Existence of structures, techniques, written
  procedures and policies that guide the planning
  process
• Written policies that structure the process of
  planning
• Formalized techniques adopted for the purpose of
  conducting strategic planning
• Known procedures for initiating the planning
  process
• Processes systemize information collection and
  dissemination
• Formalization vs. Flexibility

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3. Focus

• The balance between creativity and control
  orientations inherent within the strategic
  planning system
• Innovation vs. Integration
• Innovative orientation nurtures creativity
  (innovative, novel solutions)
• Integrative orientation focuses more on control
  (budgetary, cost performance, controlled
  diffusion of assets within the organization)

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4. Flow

• Locus of authority or devolution of
  responsibilities for strategic planning
• Roles played by corporate and divisional managers
  in the initiation of the planning process
  (vertical orientation)
• Top-down vs. Bottom-up
• Top-down limited participation of lower level
  managers in the initiation of the strategic
  planning process
• Bottom-up functional management involvement in
  the initiation of strategic planning

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5. Participation

• Breadth of organizational involvement in
  strategic planning
• Representation from the functional areas
• Narrow vs. Broad
• Narrow fosters an isolated approach to plan
  formulation with little involvement or
  interaction among various functional or
  operational managers
• Broad a variety of functional and operational
  areas help offset bounded rationality of top
  managers

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6. Consistency

• Concerned with the frequency of planning
  activities or cycles, and evaluation /revision of
  strategic choices
• Frequent vs. Infrequent
• Infrequent time frame longer, face-to-face
  meetings tend to be ad hoc or sporadic, planning
  cycles may be year-to-year (vs. continuous or
  consistent process)
• Frequent high levels on consistency
  characterized by continuous planning process with
  frequent meetings, constant communication among
  planning participants, and frequent assessment
  and revision of strategic direction

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Proposition

• Strategic IS planning systems that reflect a
  profile of rational adaptation will be positively
  associated with planning effectiveness. The
  structure or internal coalignment of a rational
  adaptive planning system includes
• higher levels of comprehensiveness
• higher levels of formalization
• a focus on control vs. creativity
• a top-down vs. bottom-up planning flow
• higher levels of participation
• higher levels on consistency

Segars, Grover and Teng.1998
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Coalignment

• Coalignment strongly associated with planning
  effectiveness
• If dimensions of strategic planning systems
  favorably align, the planning system as a
  structure should be more successful than its
  individual dimensions
• Effectiveness may be beyond performance
  measurement (e.g., ROI, ROE)
• Alternative value-added approach
• Improved management making
• Lower costs of development
• Plans that are actionable and implemented

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Internal Planning System Coalignment

• The planning system should be structured process
  of opportunity search that adapts through
  consistent feedback and wide participation
• Rational planning tendencies of extensive
  alternative generation and solution search,
  formalized procedures and policies for planning,
  a focus on control, and top-down planning flow
• Adaptive tendencies of wide participation
  profiles and high levels of planning consistency

Planning effectiveness
Rational adaptation
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Implications for Strategic IS Planning

• Planning must be designed, evaluated, and refined
  such that the overall activity of planning does
  not become dysfunctional
• Emergent systems of planning should reflect the
  environmental and organizational context within
  which they function

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Source Strategic Information Systems Planning
Planning System Dimensions, Internal Coalignment
and Implications for Planning Effectiveness,
Albert H. Segars, Varun Grover, and James T.
Teng. Decision Sciences (journal), vol. 29, no. 2
(Spring 1998).
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IT and Organizations

• Control
• Organizational Redesign

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Control

• Ensures the organizations goal and objectives
  are met
• Mechanisms for monitoring the differences between
  desired and actual performance (i.e., checks and
  balances)
• Types of controls
• Action controls operational control level
• Result controls toward the strategic planning
  level
• Personnel controls Recruiting, hiring and
  retaining the right people with the right skills
• Transaction controls accurate and complete
  documentation of financial and legal
  transactions with regular review to ensure risk
  and asset management

Design into the Organiza-tion
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Ad Hoc Planning and Organizational Redesign
Volume increases by its cube (v3), area by its
square (a2)
Duck Tongues A Tale of Redesigning the Duck
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Common ProblemsWith Organizational Redesign

• Failure to redesign end-to-end processes
• Failure to realign operations with other
  components of the organizational redesign

Piece-meal approach
Business cycle

• Operating processes activities that define how
  a firm designs, produces, distributes, markets,
  sells and supports its products and services
• Management processes activities that define
  strategic direction and coordinate and control
  operations

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MIT90 FrameworkFive Inter-Related Components
Organization and coordination
Structure
Information Technology
Vision and direction
Planning and control
Strategy
Management Processes
Technology
Individuals and Roles
Human resources
Dynamic Equilibrium Any change to a component
requires an adjustment to the others
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MIT90 Framework

• Strategy - pattern of missions, objectives,
  policies, and significant resource utilization
  plans stated in such a way as to define what
  business the company is in (or is to be in) and
  the kind of company it is or is to be. It
  defines
• The product line, markets and market segments for
  which products are to be designed
• The channels through which these markets will be
  reached
• The means by which the operation is to be
  financed
• The profit objectives
• The size of the organization
• The image which it will project to employees,
  suppliers and customers Bullen and Rockart,
  1981

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MIT90 Framework

• Technology - encompasses all of the factors that
  directly enter into the transformation of
  organizational inputs into organizational outputs
• Tools, equipment and machinery used in the
  transformation process
• Technical procedures and systems
• Porras and Robertson (1990)

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MIT90 Framework

• Information Technology - comprises those
  technologies engaged in the operation,
  collection, transport, retrieval, storage, access
  presentation, and transformation of information
  in all its forms Boar (1997)

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IT and the Organization
Technology Push
Competitive Pull

• Cost performance trends
• Connectivity capabilities

Innovative IT-enabled applications to obtain
differential benefits in the marketplace to stay
competitive
IT as a Strategic Resource
Leveraging IT
Enhancing Productivity
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IT Application Framework
Strategic Application of IT
IT to differentiate the organization from others
Reengineering Business Processes
Basic IT to remain competitive in industry
IT Infrastructure
Basic IT to do business
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MIT90 Framework

• Management Processes - Ensure the orderly
  production of goods and services
• Planning is the process of deciding on
  objectives, on changes in these objectives, on
  the resources used to attain these objectives,
  and on the policies that are to govern the
  acquisition, use, and disposition of these
  resources.
• Control is the process by which managers assure
  that
• Resources are obtained and used effectively and
  efficiently in the accomplishment of the
  organization's objectives
• Specific tasks are carried out effectively and
  efficiently
• Anthony (1965)

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MIT90 Framework

• Structure - organization and coordination
• Communication
• Authority
• Workflow
• Leavit (1965)

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MIT90 Framework

• Individuals and Roles - people and skills
  necessary to utilize the technology
• Designs of jobs required to use the technology
• Technical expertise of organizational members
• Porras and Robertson (1990)

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IT Infrastructure

• Technology IT infrastructure Hardware and
  software
• Human IT infrastructure People to make the IT
  work
• Without the right people, an organization would
  not benefit from the most advanced IT

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Influence of IT on Organizational Resign
Structure
Technology
Successful Business Model
Management Processes
Strategy
Individuals and Roles
Strategy incorporates a vision of technology
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Extending the Enterprise

• Role of IT in Integrating the Business

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Processes
Outputs
Inputs
What does it take to get groceries into a home?
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Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
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Business NetworksDifferentiation vs. Integration

• Design of business network
• Differentiation defines how individuals, groups
  and organizations are subdivided into specialized
  work units
• Horizontal, vertical and spatial networks
• Integration defines the relationships and links
  between units that are required to unite
  specialized individuals, units and organizations
  to enable them to achieve a common purpose and
  create shared value
• Task-based relationships, information- or
  expertise-based relationships, or social
  relationships

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Differentiation and Integration
Strategic
Vertical division
Tactical
Integration
Power authority levels
Information/expertise
Networks
Operational
Task-based
Social
Horizontal division
Specialization
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Network Relationships

• Required in environments characterized by
  increased complexity, uncertainty and turbulence,
  especially when the network contains a large
  number of highly differentiated nodes (units)
  that must work closely together to achieve a
  common goal
• Environments that require
• Innovative and creative thinking
• Information sharing and decision making
• Coordination and cooperation

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Designing High-Performance Inter-Firm Business
Networks

• Decisions considering
• Network differentiation and unit groupings
• Network integration and interdependencies
• Network ownership

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1. Network Differentiation and Unit Groups

• Capabilities and resources to execute strategy
  and achieve the business goals
• Activities required to acquire these capabilities
  and resources
• Grouping activities in specialized units to focus
  on developing the best in class capabilities, and
  efficiently and effectively achieving the goals

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2. Network Integration and Interdependencies

• Managing specialized units internal or external
  to the organization
• Organizational solutions to coordinate and
  control interdependencies among specialized units
  (in the network)
• Alignment between business environment and
  strategy to enable network to achieve goals and
  create value

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Interorganizational Governance Models

• Market models transaction based (exchange of
  goods and services for payment)
• Hierarchical models formal contracts and
  authority govern the activities to be performed,
  products or services to be provided, price to be
  paid, and length of the relationship
• Partnerships complex, uncertain and critical
  interdependencies to the success of the partners
  (businesses)

Supply chain management
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3. Network Ownership

• Within the corporation or organization
• Alliance between two members (businesses)
• Ecosystem community of diverse members, each
  working together toward achieving a common goal
  (collaborative community)

Pre-1980s
1980s and early 1990s
(Unknown)
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Hybrid Governance ModelsCollaborative
Communities

• IT opens new opportunities for collaboration
  among businesses
• Enable coordinating and controlling inter- and
  intra-firm interdependencies
• Distinguishing features
• Shared purpose and values stress an ethic
  contribution
• Organizational configurations and solutions
  support horizontal relationships (and vertical,
  authority-based and market-based relationships)
• Development of interdependent form of identity
  that motivates and engages active participation
  and affiliation

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Business Network
Manufacturers
Distributors
Peapod
Delivery
Consumer
How does IT provide a competitive advantage?
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