Developing the Organization

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Chapter 3

• Developing the Organizations IT Strategy

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The Importance of Strategy to Organizations

• A strategy is a collection of statements that
  express or propose a means through which an
  organization can fulfill its primary purpose or
  mission
• A chosen strategy must focus and coordinate the
  firms activity from the top down toward
  accomplishing its mission
• Developing a strategy begins with a thoughtful
  understanding of the firms mission, analysis of
  the environment, and a detailed assessment of how
  various business units interact

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Considerations in Strategy Development

• Managers must anticipate business opportunities
  and recognize threats or pitfalls
• They seek to capitalize on opportunities and
  minimize risk
• As circumstances change, they must re-evaluate
  their positions and reassess their course of
  action in light of new data

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Elements of a Strategy Statement
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Mission Statement

• The mission of an organization defines its
  purpose
• The IT mission statement must both be reactive
  and proactive in addressing its customers needs
• IT must understand its internal as well as
  external markets

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Environmental Assessment

• The process of visualizing and understanding
  opportunities and threats
• Attempts to account for important trends
  impacting the firm and its functional
  organizations
• Helps to develop the objectives they intend to
  achieve
• Helps to formulate a course of action that guides
  the achievement of the objectives

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Maintenance Processes

• Periodic reviews of the current operating
  environment and reassessment of the current
  course in light of updated information
• The volatility of the operating environment
  drives the frequency of reassessment
• E-commerce environments require constant
  reassessment, whereas established industries have
  lower requirements

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The Relationship of Strategy and Planning Elements
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Relationship of Strategies to Plans

• Strategy is a collection of statements that
  expresses or proposes a means through which an
  organization can fulfill its mission
• Identifies the goal or objective
• Plan is a detailed description of how an
  organization can accomplish its mission
• Lays out in detail the steps necessary for the
  organization to accomplish the goal

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Strategic Management

• A process that uses appropriate strategic thrusts
  to maximize an organizations performance in a
  given environment
• In complex or uncertain environments IT offers
  opportunities to moderate complexities and deal
  quickly with external uncertainties
• Strategy focuses on the future. It must also
  focus on alternate scenarios and plan for
  strategic alternatives

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Types of Strategies

• Functional describe the operating units broad
  goals and objectives
• Stand-alone describe individual one-time goals
  or opportunities
• Business describe broad goals of revenue and
  profit. Business strategies direct a firms
  functions towards business objectives

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Elements of an IT Functional Strategy

• Support to business objectives
• Technical support
• Organizational considerations
• Budget and financial matters
• Personnel considerations

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The Firms Business Strategy
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The Business Strategy

• The purpose of functional strategies is to
  describe how functional units support a firms
  business goals and objectives
• IT goals and the firms overall goals must be
  congruent. IT strategies are most effective when
  IT and the firms goals are internally consistent
• Strategies contain sensitive information and must
  be kept confidential

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Stand-alone Strategies

• A specific strategy to deal with a unique
  opportunity or threat
• Generally ad hoc
• If accepted, it is incorporated into the
  strategic plans of all the organizational units
  it effects
• Generally temporary as an activity matures, it
  becomes part of the routine strategies and plans

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Integrating Business and Functional Strategies

• These two strategies form the backbone of a
  firms complete strategy
• Business strategies have revenue and profit
  objectives for the firm
• Functional strategys goals must support the
  business strategys objective
• If IT does not directly produce revenue, then its
  strategies are limited to the functional type
• If it does produce revenue, then its strategy
  becomes part of the business strategy

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Assemblage of Strategies in a Firm
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Requirements of a Strategy Statement

• A strategy statement is a vehicle for focusing
  managers attention on the strategic aspects of
  the firms business
• Includes details about the firms environment
• Basis for selecting the goals and objectives
• Assumptions contained within the strategy
• Perceived risks and available options

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Strategy Outline

1. Nature of the business
2. Environment
3. Goals and objectives
4. Strategy ingredients

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Nature of the Business

• The firm must clearly delineate its mission
  before proceeding further
• Failure to understand the nature of the firms
  business can be fatal
• The individual units must define their place
  within the overall mission of the firm
• Understanding where a business unit fits within
  the larger structure helps to align unit goals
  with organizational ones

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Environment

• States what is known and what is assumed about
  the relevant, significant factors and trends
  acting on the firm
• Environmental assumptions must be tracked and
  reviewed to assure that they are credible,
  consistent, and unambiguous
• How can changes in the environment force a change
  in the firms goals?

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Goals and Objectives

• What IT capabilities are we trying to achieve,
  and what long term objectives are we going to set
  for the organization?
• Goals to decentralize or outsource are also
  included in this section

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Strategy Ingredients

• Course of action
• Assumptions
• Risks
• Options
• Dependencies
• Resource requirements
• Financial projections
• Alternatives

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Strategy Development Process
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Strategic Time Horizon

• Measured from the beginning of the current year,
  the strategic years extend from the beginning of
  year 3 to the end of the strategic horizon
• The pattern repeats annually, with the upcoming
  year becoming part of the operating or tactical
  plan

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Steps in Strategy Development

• IT strategists must develop a broad,
  comprehensive understanding of the future
  environments influences on the area of interest
• Alternative strategies should also span the
  future environment
• Selection criteria should be developed to guide
  selection of the appropriate alternative
• Primary strategies should be created with greater
  detail than alternative strategies

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E-business Strategy Considerations

• Web-based businesses include more than just
  trading in products and services, so models must
  take a broader, more strategic view of the sales
  process
• They include market development, demand creation,
  customer support, customer retention, and order
  fulfillment
• Web-based businesses require firms to exhibit
  much more responsive strategies

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IT Strategy Statement

• Business aspects
• Technical issues
• Organizational concerns
• Financial matters
• Personnel considerations

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Business Aspects

• The IT organization must maintain a keen
  awareness of the business goals and develop
  strategies to support them
• In e-business intensive firms, the IT strategy
  and the firms business strategy may be identical

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Technical Issues

• IT managers must provide leadership in using
  technology to attain advantages for the firm
• IT strategy must demonstrate the practical
  utilization of advanced technology in supporting
  the firms goals and objectives
• Utilization must be consistent with reasonable
  risks and available resources

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Organizational Concerns

• IT tends to cause organizational stresses in
  areas outside IT itself
• Not all in the organization look upon these
  changes favorably, and will need to be educated
  about the need and reasons for change
• IT managers must anticipate and take the lead in
  satisfying these needs

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Financial Matters

• Financial concerns limit the range of
  opportunities for an IT organization
• Resource constraints must be recognized early on
  in the process and addressed formally, to limit
  the amount of energy wasted
• Results must be optimized for the resources at
  hand

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Personnel Considerations

• Functional strategies must include personnel
  action plans that address recruiting, training,
  and retention of skilled employees
• IT organizations are extremely dependent on the
  skills of their employees
• A few high performing individuals can have a
  disproportional impact on the entire IT
  organization and the firm itself

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E-Business and Knowledge Management Strategies

• As firms move to embrace online transactions,
  they must understand the standards required in
  this domain
• Infrastructure adequate for internal use becomes
  unsuitable for e-commerce
• Developing strategies to support e-business
  requires the firms best effort
• Innovations in products and services influence
  technical, administrative, and business processes
  favorably

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Using and Maintaining Strategies

• Maintaining a strategy is an essential step in
  its continued usefulness
• Must document where change is anticipated to
  occur and how that change can effect assumptions
• Tracking identifies deviations early, allowing
  time to correct assumptions or to respond to new
  factors
• When tracking identifies significant deviations,
  the entire strategy may need re-evaluation

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Summary

• Strategy development is one of managements
  fundamental responsibilities
• Because IT cuts across traditional enterprise
  structures, strategy development in IT can be
  more difficult
• IT strategy can unify other strategic thrusts and
  become the firms business strategy

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Certo and Peter

• Strategic management is a continuous, iterative
  process aimed at keeping an organization as a
  whole, appropriately matched to its environment.
  The process itself involves performing an
  environmental analysis, establishing
  organizational direction, formulating
  organizational strategy, implementing that
  strategy, and exerting strategic control.

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Certo and Peter

• In addition, international operations and social
  responsibility may profoundly affect the
  organizational strategic management process. It
  is important that the major business functions
  within an organization operations, finance, and
  marketing be integrated with the strategic
  management process.