Chapter 4 IS/IT Strategic Analysis: Strategic Planning for Information Systems John Ward and Joe Peppard Third Edition Chapter 4 IS/IT Strategic Analysis: Assessing and Understanding the Current Situation

Learning Objectives Business re-engineering and IS strategy Understanding the current situation Understanding IS/IT needs of the business strategy Examining current IS/IT supply Analysis techniques Critical success factors (CSF) Balance scorecard analysis (BSC) Organizational model

Business Re-engineering and IS Strategy Re-engineering initiatives spring from business strategy IS demand supports business strategy Re-engineering needs IS/IT element Re-engineering and IS strategy forms potential models of the business. Move from traditional organizational model to process-oriented model. Two key IT questions: How can business processes be transformed using IT? How can IT best support business processes?

Relationship b/w IS/IT and BPR

Reconciling IS/IT and BPR Questions BPR IS/IT strategy formulation & planning Formulation How can we re-engineer our business to provide advantage? How can IS/IT be exploited to provide business advantage (impact)? Implementation How can we improve our processes to ensure success of the strategy? How can IS/IT ensure the success of the business strategy (alignment)?

Understanding the Current Situation An in-depth understanding of : the business strategy, the business & technology environments and the current status of IS/IT in the business. Possible to determine the opportunities, threats and requirements inherent in the business strategy. Recognize strengths & weaknesses of the business and its IS/IT opportunities. Current situation represents the starting point from which any change program begins!

Determining the IS/IT Requirements: the IS Demand Absorb every written strategy statement & interpret them into relevant IS/IT principles & CSF, application requirements, and a set of supply criteria to deliver the services demanded by the business. Ask each area of the business what their requirements are. Best course for IS strategy to be developed in parallel with the business strategy, feeding trends, opportunities and idea into the business strategy process. Work closely with all areas of the business to build a set of achievable business & IS/IT initiatives that will deliver targeted performance. IT strategy can follow directly from this analysis.

Determine the IS Demand

Fact Finding and Analysis Tasks and Deliverables (Table 4-2) Analysis of the business strategy Identify its components and the associated information needs Analysis of the current and expected future external business environment, and analysis of the current and future portfolio of the business, and its competitive strategy Determine how IS/IT can contribute to strengthening the business’s competitive positioning

Cont… Analysis of the internal business environment Understand the relevant organizational characteristics, SWOTs and other factors Identification of the CSFs of the business Crystallize the essential characteristics of success in meeting the objectives stated in the strategy

Gathering Relevant Data If information not available, some steps in Table 4.2 should be undertaken. Key information is in the heads of employees at all levels & needs to be elicited through discussion. Document review : Business strategy documents (stmt of objectives, KPI), annual plans, budgets & forecast.

Interpreting the Business Strategy A framework for developing IS/IT strategy. Two inputs relate to: Business perspective (internal & external) IS/IT perspective (internal & external)

Internal Business Environment Elements that need to be identified, analyzed and understood are: Business strategy Current business processes, activities, and main information entities & how they relate to other entities; Organizational environment: structure, assets & skills, knowledge, competencies, values, style, culture, and relationship From these the information, systems and technology needs arise and can be prioritized. The achievement of the business objectives The measurement of the performance towards achieving the business objectives

Continue … Two types of activities driven by the business strategy Activities that must be performed in order to contribute directly to achievement of business objectives, and their supporting information needs, have to be identified. Secondary activities that have to be performed to measure performance toward achieving those objectives, must be identified.

The Business Strategy Identify current strategy and any emergent new elements. Interpret & analyze the strategy & describe it in a structured manner. Compile & confirm the consequent IS requirements.

Continue … Main constituents of the business strategy (see page 189, box 4.1) Mission: an unambiguous statement of what the business does and its long-term purpose Vision: an easy identify picture of what the business will be in the future, and how it will operate Goals: the set of major achievements that will accomplish the vision Objectives: the targets (unambiguous and measurable) for accomplish the business vision Strategies: the methods to meet the business objectives Critical success factors (CSFs): a few areas have to be right in order for the business to flourish

Continue … Business drivers: a set of critical forces for the business to change Business area plans: the plan of the various areas of the business, which document the response or information needs to the business strategy Identifying Strategy Often, business strategies are not: - Recorded formally - Well constructed - Well communicated Identify through questioning, analysis & creative prompting (see some questions in additional slides) May be no strategy at all and only bottom-line objectives

Source of Requirements The mission, vision, strategic and objectives and KPI The strategies or initiatives are increasingly likely to have an IS/IT content that is often essential to achieving the desired result. The business area plans usually have short-term IS/IT requirements The CSF lead to 2 different type of IS/IT requirements: enable success and monitor progress

Example: Architecture Model

Business Processes, Activities & Key Entities Business processes: the sets of interlinked activities to deliver specific outputs to customers Activities: the elements of processes To produce, promote and distribute products or services To develop, support, and administer the infrastructure To measure the performance against objectives Key entities: important data and information associated with business processes Models Process flow models or process dependency charts Hierarchical activity models or functional decomposition diagrams Entity relationship models Data flow diagrams (DFDs) Activity/entity matrices Class diagram

Business Process Map (Cassidy)

IS Models the whole corporate body SBU level Major business function level However, where there is a good deal of similarity b/w the units, or business synergy, then reconciliation b/w common entities becomes important

Organizational Environment Structure, relationships, culture, skills, resources and the people of which it is composed. These are an important input into the planning process. Become increasingly important when the magnitude and pace of change has implications for all aspects of the business.

External Business Environment For the purpose of IS/IT strategy formulation, it is essential to understand and analyze the environments. Opportunities for IS/IT to impact the business and contributing to the shaping of the business strategy Threats Chapter 2 p. 70

Examining the Current IS/IT Environments To establish the gap b/w current and future targeted provisions To determine whether the environment can sustain the changes required or itself needs changing To enable the strategies to take account of trends and opportunities from emerging technologies To investigate how competitive or complementary organizations are applying IT

Examining the Current IS/IT Environments Assessment of the internal IS/IT environment: Evaluation of the current application portfolio & the applications under development to determine their content, coverage & contribution. Evaluation of current information resource. Evaluation of current infrastructure & IT services and resources, accomplished through technology assessment.

Current IS Situation-Internal IS environment Organizational structure Expenditures Backlog Other locations

What does Our Current Computing Environment Look like? Network Business Application Systems Desktop Computing Engineering

Business Application Environment On what hardware do your business applications operate? What relative size is this H/W? What business application modules do you utilize? Are the applications vendor-supplied packages? Is the company on the current release? Have the packaged application been customized? In what programming languages is the system written? What is the size of the systems in terms of LOC How many reports do the systems generate? How many programs are in the systems What is the average response time? How many workstations, PC and printers are connected Are there any special devices necessary to support future requirement?

Computing Environment How many PCs does the company have? How many PCs by location and functional department? What is the breakdown by class of PCs Are PCs purchased or leased? How many sever are there? How many printer are there? What standard PC software does the company utilize? What e-mail system does the company utilize?

Network What is the current network operating system? How many servers are there? What is H/W platform? What is the network topology? What is the network backbone? Are there any known concerns or growth area relative to the network? What is the reliability of the network? Obtain several levels of network diagrams

Organizational Structure What are the general areas of responsibilities and activities, or how is the group organized? What are the responsibilities of each group? Include an organizational chart with names and titles How many people are in information systems organization? How does the break-out by functions

Expenditures What is the total information systems expenditure? What is the break-down by category How do the expenses by category compare to the past three years? How much capital money did the company spend each year on total information systems purchase? What are the information systems expenditures as a percentage of sales? How does it compare with the industry?

Backlog Projects Project name Project description Priority Status What are the total estimated hours to complete the project? How many hours have been completed to date? What is the estimated completed date? Who is assigned to the project from information systems? What are the total cost savings anticipated as a result of the project? Who is the business person or area requesting the project? What additional expenses are required for the project?

Other Locations What is the size of the locations’ information systems organization How are the resource organized? What business application systems does the locations utilize? What computer H/W does the location utilize? How many PCs the locations have?

External IS/IT Environment To gain a perspective on technology trends & opportunities for using IS/IT in new & innovative ways. Looking at competitors and other comparable organizations on what they are doing. Research on technology trends and information.

Industry Trend: 4 Tiers Obsolete or trailing edge Ready to implement Unit cost may be too high to implement due to the age and support costs of the out-dated technology Ready to implement Existing technologies that are available and proven, have a defined cost saving, low risk implementation Emerging technologies Relative newer technologies, higher risk implementation, would not be cost effective Need further review Technologies that are more experimental than commercial, high cost and risk

Competitor Profiles How many employees does the company have in information systems and in the whole company? What business application software is utilized? When did the company implement it? Do their various divisions or locations operate on a central or common information systems What is the status of their PC environment and network? Obtain any information regarding information systems expenditures What functions does the company offer their customers What particular technologies does the company utilize?

Analysis Techniques Some techniques used in analyzing current situation and the business strategy. See Table 4.5 pg 205 Business strategy analysis CSF analysis SWOT analysis Balance Scorecard analysis (BSC) Business portfolio and competitive strategic analysis Value chain analysis Process analysis / BPR Organizational modelling Business modeling-information analysis techniques Current portfolio evaluation Technology assessment and IS/IT infrastructure review

Information Requirements To meet the current business objectives : the use of CSF and BS. DIKAR (Data, Information, Knowledge, Action, Result) Model. See Figure 4.4 on page 207

Information in Context the focus is on data processing and the provision of information to the business. the focus is on business results and actions and knowledge required to achieve those results.

Balance Scorecard Analysis (BSC) Identifies the information required to measure performance against the business objectives. Financial Perspective Objectives Measures How do we look to shareholders? How do customers see us? What must we excel at? Customer Perspective Objectives Measures Internal Business Perspective Objectives Measures Innovation and Learning Perspective Objectives Measures How can we continue to improve & add value? Adapted from Ward & Peppard, Strategic Planning for Information Systems, John Wiley & Sons 2002

Balanced Scorecard: An Example

Balance Scorecard

Critical Success Factors (CSF) Once the Current Situation is Understood, it can then be analyzed. Rockart (1997) Defines CSF’s as ..“the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organisation” First developed at MIT in 1970’s CSF analysis – identifies what has to be done, or changed, in order to achieve the objectives, including new information and/or systems needed.

Critical Success Factors (CSF) The aim is to match IS with Business needs A “top-down approach” and can be applied on different levels Industry Corporate Business unit or function Manager Usages in management IS opportunities to achieve Objectives Information needed by executives

CSF Benefits of CSF process are :- Involves Senior Management Provides an IS/IT Plan based on consensus Acts as a Catalyst Aligns IS projects to Business Strategy Links IT investment to Business Strategy Links Objectives to information requirements

Critical Success Factors Analysis process for IS requirements Understand mission and objectives Determine CSF for each objective Conduct a SWOT on each CSF Consolidate across objectives and identify information dependencies Outline plan of IS requirements

VISION MISSION Objectives should be clearly identified Organisation may typically have 6-10 objectives Each objective may have 4-6 CSF’s “to provide every pupil with the best possible I.T. Facilities to support their studies” Objectives “by providing high quality software” Critical Success Factors Critical Success Factors A reasonable number of CSFs per objective is between 5 and 8 Too many CSF’s suggest the objective is unachievable Too few that it is not ambitious enough

CSFs Basic Processes

Implementing The CSF Method Gain consensus from managers about which CSF’s are most important How - Using a steering committee Issues may never have been explicitly discussed and resolved Rank the objectives Prioritise CSF’s Consolidate the CSF list

Consolidating BSC & CSF Critical Success Factors can be linked to Balanced Scorecard Determine CSF from BSC Objective & Measures by identifying actions that would allow objectives to be met Model may extend one step further to IT/IS needs to carry out Actions/CSFs

Business Process Analysis Assessing the effectiveness of core business processes in support of business objectives and drivers from one or a number of SBU’s. Result of process analysis=>Decision may be made to embark upon major redesign of one or a number of business processes.=> IS/IT elements can be determined and assess and built into the IS demand.

Business Process Analysis: Assessment Process Define the areas where the greatest opportunities exist to improve performance Predict how effective the process could and should be in making their fullest contribution to the drivers (increased market share) Compare current and potential performance => indication of the gap that could be made up by improving the process

Process Perspective Process: Organized collection of behaviors that meet a defined business purpose, performed according to specific targets Identifying processes: determine expectations of stakeholders then determine processes required to deliver expectations Oxford Dict. A Process is a continuous and regular action or succession of actions, taking place or carried out in a definite manner, and leading to the accomplishment of some result; a continuous operation or series of operations.

Process Importance-Performance Assessment Used in process redesign to determine areas most in need of improvement High Concentrate Here? Maintain Performance? Not Important? Possible Overkill? IMPORTANCE Low Low PERFORMANCE High

Organizational Model Core or key organizational process at the center Six supporting ‘structural’ processes External environment Employees & other tangible assets Formal organizational arrangements Internal social system Organization’s technology Dominant coalition Uses: Filtering mechanism to ensure ideas will ‘fit’ Allows required cultural changes to be compared against model Provides a comprehensive understanding of the environment

The Organizational Model

Evaluating Gap Between Current/Required IS/IT Environment Use modeling & process redesign to determine: Processes requiring recognition, simplification, streamlining or redesign New or upgraded information resources Changes in IT supply resources & competencies to support required IT role

Conclusion The information systems strategy should focus on ensuring that information – and its manipulation, use and sharing - adequately supports the needs of the organization or supply-chain, and on identifying and exploiting opportunities for IS/IT to gain competitive advantage. The information technology strategy is concerned with managing the lifecycle of the infrastructure, applications portfolio and management required to support the information systems. It should also have a forward-looking element in support of future IS strategies, especially considering the major investment that can be required in enhancing the core infrastructure platform

Additional Slides

4 Steps for Data Gathering (Cassidy) Obtain a copy of the strategic plan or any information regarding business planning. Review this information carefully. Meet with each member of the Executive Committee. Probe questions. Assemble the information in a summary format. Meet with Executive Management in a meeting to report what you have heard regarding the business direction in order to obtain confirmation of you information

Some of the Questions: for Executive Management Mission, vision, values, goals, objectives What is the mission and vision of the business? Are there any other high-level business direction statements, such as values? What are the goals and objectives of the company? What is the company’s goal in terms of market position?

Cont.. Strategies, business priorities for the year, critical issues for the year What are the specific strategies or business priorities for this year? What are other prioritized business project, issues, or objectives for this year? What must the business accomplish this year to remain competitive? What critical issues face the organization today? What critical issues face the organization in the future?

Cont… Business information In what business markets does the company participate? Are there any changes in the business markets in the future? Who are the customer? What is the company’s niche? Why do customers buy from this company rather than from the competition? What are the basic product lines?

Cont… Industry How many competitors are in the industry and what is their size? Who are their main competitors Are there any industry associations? What change in the industry? What is your competitive advantage? Do you plan on growth through acquisition?

Cont… External environment factors Internal strengths and weakness What are the external environment factors? What challenges does the company face in the marketplace? What are the external opportunities and threats? Internal strengths and weakness What are the internal strengths of the company? What are the internal weakness of the company? What are the internal environment factors? What internal challenges, opportunities, and threats does the company have?

Cont… Information systems What is information system doing well? What are the areas in which information systems must improve? What features or functionality can competitors offer with their system that you cannot? What business decisions are difficult or impossible to make giving existing information available in systems? How are decisions being made? Who needs the information?