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Chapter 4IS/IT Strategic Analysis:

Assessing and Understanding the Current Situation

Strategic Planningfor Information

Systems

John Ward and Joe Peppard

Third Edition

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Learning Objectives

1. Business re-engineering and IS strategy2. Understanding the current situation3. Understanding IS/IT needs of the business

strategy4. Examining current IS/IT supply5. Analysis techniques

– Critical success factors (CSF)– Balance scorecard analysis (BSC)– Organizational model

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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?

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Relationship b/w IS/IT and BPRIdentify need for change in

development of business strategy

Capabilities of IT as an

enabler of change

IT can be used to model/simulate/

prototype options for change

IS and IT as a key component

of achieving change

Develop options for

radical change

Evaluation of options

Implementation of chosen

option

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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)?

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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!

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Determining the IS/IT Requirements: the IS Demand

Ask each area of the business what their requirements are.

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.

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.

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Determine the IS Demand

SWOT CSFs Value Chain

Business Model

Current Expected Business and

Technical Environments

Potential status of I S/ I T

Current Status of I S/ I T

Determine the I S Demand

Business Strategy

Proposed business

initiatives

Proposed I S/ I T

initiatives

I mpact and role

of I S/ I T

Opportunities f or I S/ I T innovation

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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

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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

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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.

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Interpreting the Business Strategy

A framework for developing IS/IT strategy.

Two inputs relate to:

• Business perspective (internal & external)

• IS/IT perspective (internal & external)

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Internal Business EnvironmentElements 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

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Continue …

• 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.

Two types of activities driven by the business strategy

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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.

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Continue …

– 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

Main constituents of the business strategy (see page 189, box 4.1)

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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

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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

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Example: Architecture Model

R

C

Architecture Model

Business Model

Business process model Business data model

Process/Entity matrix

App 1

App 2

IS process model

R

C

IS/Entity matrix

IS data model

App 1

App 2

Entity life history

App 1 App 2

IS functional model

IS model

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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

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Business Process Map (Cassidy)

Administration

Planning

Design & Development

Produce & Deliver

Resource Development

Business Process Map Le

ader

ship

Cus

tom

er S

atis

fact

ion

Man

agem

ent

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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

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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.

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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

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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

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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.

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Current IS Situation-Internal

• IS environment

• Organizational structure

• Expenditures

• Backlog

• Other locations

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What does Our Current Computing Environment Look like?

Business Application Systems Network

Desktop Computing

Engineering

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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?

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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?

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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

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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

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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?

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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?

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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?

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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.

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Industry Trend: 4 Tiers

• Obsolete or trailing edge– 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

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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?

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Analysis Techniques

• 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

Some techniques used in analyzing current situation and the business strategy. See Table 4.5 pg 205

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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

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Information in Context

DATA INFORMATION KNOWLEDGE ORGANIZATION ACTION

BUSINESS RESULTS

Critical success factors

Balanced scorecard

process

obtain

interpret

defines

decisions

require

drive

measures

Technology view

Business view

the focus is on business results and actions and knowledge required to achieve those results.

the focus is on data processing and the provision of information to the business.

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Balance Scorecard Analysis (BSC)

Customer PerspectiveCustomer Perspective

ObjectivesObjectives MeasuresMeasures

Internal Business Internal Business PerspectivePerspective

ObjectivesObjectives MeasuresMeasures

Financial PerspectiveFinancial Perspective

ObjectivesObjectives MeasuresMeasures

Innovation and Learning Innovation and Learning PerspectivePerspective

ObjectivesObjectives MeasuresMeasures

How do How do customers customers see us?see us?

How do we look How do we look to shareholders?to shareholders?

What must What must we excel at?we excel at?

How can we continue toHow can we continue toimprove & add value?improve & add value?

Adapted from Ward & Peppard, Strategic Planning for Information Systems, John Wiley & Sons 2002

Identifies the information required to measure performance against the business objectives.

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Balanced Scorecard: An Example

Profits and

RONA

Fewer planes

Grow revenues

Strategic systems

Crew scheduling

Strategic job

Ramp agent

Lowest prices

Attract & retain more customers

On-time service

Fast ground turnaround

Ground crew alignment

Strategy Map Balanced Scorecard Action Plan

Process: Operations ManagementTheme: Ground Turnaround

Objectives Measurement Target Initiative Budget

· Profitability· Grow Revenues· Fewer planes

Financial Perspective

Customer Perspective

Internal Perspective

Learning and Growth Perspective

· Attract & retain more customers

· Flight is on time

· Lowest prices

· Fast ground turnaround

· Develop the necessary skills

· Market value· Seat revenue· Plane lease cost

· # repeat customers

· #customers

· FAA on-time arrival rating

· Customer ranking

· On-ground time· On-time

departure

· Strategic job readiness

· 30% CAGR· 20% CAGR· 5% CAGR

· Increase 12% annually

· #1

· 30 minutes· 90%

· Yr. 1-70% Yr. 3-90% Yr. 5-100%

· 100%· Info system availability

· Strategic awareness

· % ground crew stockholders

· 100%

· 100%

· Develop the support system

· Ground crew aligned with strategy

· 70%

· #1

· Implement CRM system

· Quality Management

· Customer loyalty program

· Cycle-time optimization

· Ground crew training

· Crew scheduling system rollout

· Communications program

· Employee Stock Ownership

· Plan

Total Budget

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

· $XXX

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Balance Scorecard

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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.

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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

INDUSTRY CSFs

ORGANIZATIONAL OBJECTIVES

ORGANIZATIONAL CSFs

BUSINESS UNIT OR FUNCTIONAL OBJECTIVES

BUSINESS UNIT OR FUNCTION CSFs

MANAGER’S OBJECTIVES

MANAGER’S CSFs

Help define

Set

Help Define

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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

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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

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“to provide every pupil with the best possible I.T. Facilities to

support their studies”

“by providing high quality software”

•Objectives should be clearly identified•Organisation may typically have 6-10 objectives•Each objective may have 4-6 CSF’s

VISION

MISSION

Objectives

Critical Success Factors Critical Success Factors

A reasonable number of CSFs per objective is between 5 and 8Too many CSF’s suggest the objective is unachievableToo few that it is not ambitious enough

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CSFs Basic Processes

DE

F

Business objectives

12

3

Critical success factors

AB

C

Mission

Balanced Scorecard

Information to measure

performance

DE

F

CSFs

AB

C

Options for evaluation

SWOTCSFs

AB

C

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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

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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

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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.

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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

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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.

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Process Importance-Performance Assessment

• Used in process redesign to determine areas most in need of improvement

Concentrate Here?

Maintain Performance

?

Not Important?

Possible Overkill?

High

LowHighLow

IMP

OR

TA

NC

E

PERFORMANCE

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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

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The Organizational Model

Key organizational processes

· Information gathering· Communication· Decision making· Matter/Energy

transporting· Matter/Energy

environment

Formal organizational arrangements· Structure· Operating systems

Dominant coalition

· Personal characteristics

· Goals, strategies

External environment

· Task environment· Wider environment

Technology

· Methods· Technique

Social systems

· Culture· Social structure

Employees & other tangible assets· People· Plant, equipment, etc.

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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

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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

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Additional Slides

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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

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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?

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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?

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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?

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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?

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Cont…

• External environment factors– 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?

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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?