2 IS Planning The Changing World of Planning Seven Planning Techniques Why planning is so difficultTraditional vs Sense-and-Respond ApproachSeven Planning TechniquesStages of GrowthCritical Success FactorsCompetitive Forces ModelFive Forces Analysis of the InternetValue Chain AnalysisE-Business Value MatrixLinkage Analysis PlanningScenario Planning
3 ParadoxIS planning is becoming more difficult and more important at the same time:Technology changing so fast: “Why bother?”YETMost organizations’ survival is dependant on technologyGood News = variety of approaches, tools and mechanisms availableBad 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 todaySubtle difference = ‘strategy making’Strategy = stating the direction in which you want to go and how you intend to get thereThe 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 yearsTactical = 1-2 yearsOperational 6 months – 1 yearEmphasis on strategy has undergone a definite shift in recent yearsBasic trend = move from a tactical midrange focus to a truly strategic effort
8 Why IS planning is so difficult? Business Goals and Systems Plans Need to AlignSome believe = “too sensitive” = PROBLEMSFortunately = trend for CIOs to be part of senior managementTechnologies Are Rapidly ChangingContinuous planning?Old days of planning at ‘start of year’ = goneAdvanced technology groups to monitor changes; adjustments in current decisions
9 Why IS planning is so difficult? Companies Need Portfolios Rather Than ProjectsEvaluation on more than their individual meritHow they fit into other projects and how they balance the portfolio of projects (Internet Value matrix)Responsibility Needs to be JointIS planning by CIO no longer effectivePartnership among CEO, CIO, CFO, COOIS Planning=Business planning, no longer just a technology issue
10 Why IS planning is so difficult? Infrastructure Development is Difficult to FundEveryone “knows infrastructure development is crucial”, BUT difficult to get funding just to develop or improve infrastructureOften done under the auspices of a large application projectChallenge = develop improved applications over time, so that infrastructure improves over timeMainframe-client server: to share corporate and desktop computingERP: to centralize and standardize dataWeb presence: to give users access to back-end systemsWeb services architecture: to work intercompany
11 Why IS planning is so difficult? Other planning issuesTop-down Vs. bottom-up; radical change Vs. continuous improvementMost 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 goIS executives created an IS strategic plan = how IT would support the business planIT implementation plan created to describe exactly how the IS strategic plan would be implementedAssumptions:The future can be predictedTime is available to do these 3 parts in sequenceIS supports and follows the businessTop management knows best (broadest view of firm)Company = like an ‘Army’
14 The Changing World of Planning The future cannot be predicted – discontinuous changeWho predicted Internet, Amazon, eBay etc.? New models will appearTime is not available for the sequenceIT implementation plan means IS Dept. already ‘late’ to support business plan; it needs to be ahead of business strategizingIS does not JUST support the business anymore; it shows IT-based opportunitiesNo longer business first, IS secondAt 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 opportunitiesInside out Vs. outside in approachAn organization is not like an armyIndustrial 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 riskythe way to move into the future is step by step using a sense-and-respond approachSense a new opportunity and immediately respond via testing itMyriad of small experiments in parallelFormulate 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 partnersEmployees who are closest to the future (young) should become prime strategists. In the ‘Internet Age’ = younger employees
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 mechanismThat 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 contextNeed to meet often to discuss:Shifts in the marketplaceHow well each of the experiments is proceedingGaining ‘followership’ or showing waning interest?
21 Today’s Sense-and-Response Approach Manage the strategic envelope by:Defining a territoryHolding ‘strategic conversations’Regular meeting by executives to monitor environment and respondCOO reports on ‘today’ (size of mobile workforce)CIO reports on ’tomorrow’ (developments in Web Services)VP of HR reports on ‘people’ issuesHelps to spot trends, launch new projects, add or cut funding to existing projectsRegular 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 credibleSecond= need to outsource operational work to free IS staff for planningTest the FutureIS Dept. needs to test potential futures before the business is ready for them (thinking ahead of the business), by:Providing funding for experimentsWorking with research organizationsHaving 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 definitionsCreate and instil mobile commercial standards among handheld devicesImplement e-commerce security and privacy measuresDetermine operational platforms (ERP, Supply Chain Management …)
24 Seven Planning Techniques Stages of GrowthCritical Success FactorsCompetitive Forces ModelValue Chain AnalysisE-business Value MatrixLinkage Analysis PlanningScenario Planning
25 Stages of Growth (Nolan and Gibson) Stage One: Initiation: Early successes increase interest and experimentationStage Two: Contagion: Rapid proliferation, little planning, much spending; learning periodStage Three: Control: Management concerned about benefits, so introduces control; IS Dept and users become accountable; Efforts towards standardizationStage 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 GrowthThe 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 outImportance of this conceptual framework is understanding at which stage the org. is a precursor of IS planninge.g. if use of Web services is in Stage II, too much control can kill of new uses of technologyManagement principles differ from stage to stageOrganization 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 / improveFewer than 10 CSF per executive to monitorCSF 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 CSFsMonitoring CSFs: to keep abreast of ongoing operationsBuilding CSFs: to track progress of programs of changeSteps to determine CSFsGoals and objectivesFactors to accomplish these objectives2-3 measures for each factor (most difficult part)Plan systems to support monitoring of these measures
30 3. Competitive Forces Model (Porter) Threat of new entrantsBargaining power of customers and buyersBargaining power of suppliersSubstitute products or servicesThe intensity of rivalry among competitorsToday, 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 activitiesAnalyzing the value chain showshow a firm can add value to each activitydetermine 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 MarketspacesMarketspaces where information substitutes for physical product and locationHow 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 ChainsIn traditional value chains, information is a support element, not a source of value in itselfTo 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 ChainsAt every step in the virtual chain value through information can be added by:Gathering informationOrganizing informationSelecting informationSynthesising informationDistributing 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 advantageFrito-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 waysInsurance 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 policiesNew 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 areasNew economies of scope allow companies to offer financing and discount programsTransaction 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 thinkingSo,‘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 CiscoEvery IT project is assessed in two categories:Criticality to the businessNewness of ideaEach 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 channelsSteps in the Methodology:Define power relationships among the various players and stakeholders:Identify who has the powerDetermine future threats and opportunities for the company
44 6. Linkage Analysis Planning Map out your extended enterprise to include suppliers, buyers, and strategic partnersThe enterprise’s success depends on the relationships among everyone involvedSome 70% of the final cost of goods and services is in their information contentWin-win: a supplier keeps buyer’s inventory and delivers just-in-time, but gets paid electronically upon deliveryPlan your electronic channels to deliver the information component of products and servicesCreate, distribute, and present information and knowledge as part of a product or service or as an ancillary goodThose 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 futureThe 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 scenariosConstruct the scenariosEach scenario is based on a driving uncertaintyEach scenario must be plausibleTo 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 PlanningWhen the scenarios are developed, planners decide how their current strategies would fit in each caseThen 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 proprietaryThe Worknet Enterprise scenario could occur if companies outsource management of their data and share it extensively with specific partnersThe 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 providersThe ‘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 PlanningCh04 Slide 50Just re-sized border on heading
52 ConclusionBased 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 futureFuture is not likely to be an extrapolation of the pastSuccessful planning needs to support “peering into the future” – most likely in a sense-and-respond fashionIS 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 successfulIS plans typically use a combination of planning techniques presentedNo 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 CaseIT StrategyforRoyal Dutch/Shell GroupPART 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 customersMoved on to buying Internet Companies as well as aligning with Sun to promote JavaOver time = moved into a variety of technologies:Web, Cable news, Digital movies, Cable modems, Handheld OS, Video server, Music, Multiplayer gamingNot all came from ‘top management’ e.g. first server came from a ‘rebel’ projectGetting its fingers into every pie that might become importantMissed some – paid $$$ later
57 SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the ActionIncubator for testing ideas on IT, social relationships, and networking for Skandia, the large Swedish insurance companyDifferent generations (3G: 25+, 35+, 45+) collaborate on ‘on-the-edge’ projectsIn order to talk = focus on questions (= dialog) rather than answers (= debate)Presented as ‘plays’ (Vs. Report)“Garden” = some of the projects are growing; others = notCombining senior wisdom with young people’s entrepreneurship leads to a real powerhouse
58 SHELL OILCase 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 timeGoal = not to drive strategy from ‘Corporate’ (tried and failed dismally) but to interact directly with the grass roots and support their initiativesTechnique = 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 projectsGuidance 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 buyersDecreases barriers to entryIncreases the bargaining power of suppliersIncreases the threat of substitute products and services, andIntensifies rivalry among competitorsRecommend = focus on your strategic position in an industry and how you will maintain profitabilityNot 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 marketspaceDealers 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 monthThe 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 categoryIts executive dashboards are an example of operational excellence projectsMulticast streaming video used for company meetings is a rational experiment, andIts development of a virtual supply chain is seen as a breakthrough strategy
62 Electric Power Research Institute Case example: Linkage Analysis PlanningEPRI’s challenge - compress “information float” - elapsed time from availability research findings to the use of those results in industryAnswer: EPRINET - a natural language front end for accessing online information, expert system-based products, facilities, and video conferencing