1. Information Systems Planning

2. IS Planning The Changing World of Planning Seven Planning Techniques
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

3. 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

4. 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

5. 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

6. Types of Planning

7. Planning Shift

8. 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

9. 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 Planning=Business planning, no longer just a technology issue

10. 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

11. 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

12. 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.

13. 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’

14. 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

16. 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)

18. Today’s 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

19. The Changing World of Planning
Figure 4-6

20. Today’s 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 doesn’t 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?

21. Today’s 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

22. Today’s 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

23. Today’s 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 …)

24. Seven Planning Techniques
Stages of Growth
Critical Success Factors
Competitive Forces Model
Value Chain Analysis
E-business Value Matrix
Linkage Analysis Planning
Scenario Planning

25. 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: Integration:take advantage of new technology to integrate existing systems.
(Stage Five: Data Administration: DP function created to plan and control use of organization’s data)
(Stage Six: Maturity: IS part of managerial processes; alignment with business plan.)

27. 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)

28. 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)

29. 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

30. 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?

31. 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

33. 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 Porter’s Value chain to find the answer

34. 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.

35. 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

36. Virtual Value Chains Evolution 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

37. 4. Virtual Value Chains Evolution 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)

38. Virtual Value Chains Evolution 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

39. Virtual Value Chains RULES
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)

40. 4. Virtual Value Chains Mindshift from So,
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.

41. 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-Low=provide a fundamentally new way of working in overhead areas, not business-critical areas (3-6 months)
Operational excellence: High-Low=medium risk because they may involve reengineering work processes (no immediate returns rather increase corporate agility, customer satisfaction; 12 months)
Rational experimentation: Low-High=test new technologies and ideas (short time frame; if successful become one of the other 3 types)
Breakthrough strategy: High-High=potentially have a huge impact on the company (eBay, extranets shared by partners)

43. 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

44. 6. Linkage Analysis Planning
Map out your extended enterprise to include suppliers, buyers, and strategic partners
The enterprise’s 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 buyer’s 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

46. 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

47. 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

48. 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.

49. 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

50. CASE EXAMPLE Scenarios 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

51. Scenario Planning
Ch04 Slide 50
Just re-sized border on heading

52. 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

53. 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

54. “Peering into an unknown future”
Conclusion
“Peering into an unknown future”

55. Royal Dutch/Shell Group
PART I Discussion Case
IT Strategy
for
Royal Dutch/Shell Group
PART I DISCUSSION CASE:
What IT Strategy Would You Recommend Based on Royal Dutch/Shell Group’s Scenarios?
This case presents brief synopses of the eight real-life scenarios Shell has made public since 1992 – especially the two published in 2001 (the next two will be in early 2004).
Based on these scenarios (which can be found in their entirety on Shell’s Web site), students are asked which of the two 2001 scenarios they believe is an accurate prediction of how the world will develop.
From that, present an IT strategy they would advise their company to follow to succeed in this world and why, and list examples of its implementation.

56. 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

57. 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 people’s entrepreneurship leads to a real powerhouse

58. 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

59. 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

60. AN AUTOMOBILE MANUFACTURER Case 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

61. CISCO SYSTEMS Case Example – E-Business Value Matrix
Cisco’s 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

62. Electric Power Research Institute
Case example: Linkage Analysis Planning
EPRI’s 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, facilities, and video conferencing