1 fb5003–7 strategic is planning “we don’t do it projects at jetblue. we do business...
TRANSCRIPT
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FB5003–7Strategic IS Planning
“We don’t do IT projects at JetBlue. We do Business Projects” – CIO Joseph Eng.
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Story One
The CEO of an insurance company wonders why a key competitor seems so much more innovative and responsive to customer needs. “How do they manage to initiate, customize, and support such a variety of insurance products so quickly?” she asks. “We could not cope with the complex information processing that must be required! What are they doing differently with their people and technology? Our systems personnel are always bogged down with last year’s priorities…”
Chan, MISQE, 1, 2, 97-112.
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Analysis
The competitor:has developed core competence in the
application of IS to business needs.has developed the ability to respond to
business conditions effectively (business intelligence + KM)
has employees who can apply relevant knowledge efficiently & effectively.are focused on today’s tasks
has identified information as a critical resourceensures that the IS fits and supports the
businesshas, in consequence, a better Business-IS
alignment
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Story Two
A CIO wonders when he will be accepted at top management meetings. Although he has won a long, hard battle to be present at these meetings, to understand new business directions better, he senses that his presence is merely tolerated. His ideas have little clout. His colleagues acknowledge that IT is becoming increasingly important to business operations, but their thinking and behavior stifle innovation.
Chan, MISQE, 2, 1, 97-112.
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Analysis
The organisation itself barely recognises the importance of information
The CIO is marginalised perhaps useful as someone important
for operational support, but not strategic planning.
The organisation is probably failing to align its overall business direction with its IS policies, skills, capabilities
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Story Three
The CEO says to his board “we need a new kind of CIO; someone who understands our whole business, someone whose career is *not* over [laughter], someone who can help drive this company in these turbulent times. Do people like this exist?”.
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Analysis
What do you think?Do these people exist?What kind of background would a
person like this have?What changes have occurred in the firm
– changes that inspire a CEO to talk like this?
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Questions to Ask about Organisational IS
Does IS drive your organisation’s competitiveness?
What role does IS play in your corporate strategy?Mission critical, integrated?Peripheral, supporting?
Now? Five years later?
Are significant resources devoted to IS, or just a few $$ here and there?
Are IS people deeply engaged in many aspects of your business?
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IS and Strategic Positioning
Consider the following companies. Is IS strategic, mission critical,
supporting?China Light & Power, HK ElectricCathay Pacific, MTR, OOCLHSBC, HK Post OfficeCityU, Sun Hung Kai Properties, PWCLow-tech SMEs
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What about Risks?
Risks are involved in different aspects of an IS/IT portfolio.
The level of the risk depends on the importance of the IS/IT to the organisation
Risks apply to software & applications, hardware, networks, procedures, … and … people & culture.
Each competence needs to be risk-assessed.
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The Consequences of Poor Business-IS Alignment?
Competencies are not developed, promoted or managed.
Risks are poorly assessed (if at all). Business executives cannot clearly articulate
their IS needs and don’t really understand what IS is for.
IS people have limited business vision or knowledge.
IS investments are expensive and yield low returns.
“We have 25 different (unintegrated) CRM systems!”
First rate ideas from first rate people are not developed appropriately (or at all).
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Then What is (IS) Alignment?
“the degree to which the IT mission, objectives and plans support and are supported by the business mission, objectives and plans”
[Reich & Benbasat, MISQ, 24, 1, p.82]
“fit” & “integration” among business strategy, IT strategy, business infrastructure, and IT infrastructure.
[Henderson & Venkatraman, IBMSJ, 32, 1, 4-16]
Effective IS management requires a both a balance and effective alignment across four domains.
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Henderson & Venkatraman’s Strategic Alignment Model
Strategy Alignment Process(Linkage & Automation)
IS/ITInfrastructure
and Processes
IS/IT Strategy
IS/ITTransformation
OrganisationalInfrastructure
and Processes
Business Productsand Services
IS/IT Productsand Services In
tern
al
BusinessTransformation
Ext
erna
l
Business Strategy
Business Domain IT Domain
Adapted from Henderson & Venkatraman, 1992
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Problems and Possibilities
How can we align IS and the Business? How can we balance the different
activities? How can we remain agile to emerging
opportunities?
By not looking solely at profit, but also other legitimate stakeholders
By looking at the business, and its operating context as a whole
By changing internal processes
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Beyond Alignment is Agility & Innovation
Strategic IT investments that will change the enterpriseWeb 2.0 and Interactive platforms
A climate of continuous change is more powerful than globalisationProject requirements will change (long) before
the project is complete. Agile Enterprise Management is needed to
thrive in an environment of continuous change
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What is Enterprise Agility?
The ability to respond, innovatively to market challenges and opportunities fast enough so as to enhance or maintain enterprise value.Is it better to focus on efficiency or
value-added?Rapid decision making is key to
agilityAgile management is a critical part of
an agile enterprise.
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Agile Management Structures
Have highly distributed power coupled with the authority (and willingness) to make decisionsInformation must be readily availableClear rules and lines of responsibilityInstant access to EKRs and
communities of expertsWhen change is the competitive
driver, nothing is sacred
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In an agile enterprise…
Leadership must be collaborative Strategic planning and action are no
longer solely the prerogative of the CxOsBusiness unit managers and business
developers must be involved too Reliance on Web 2.0 social networking
applications will become commonplace The right IT must be in place (not just EIS)
for BUMs and BDs, where IT complexity is managed and Web 2.0 is leveraged at the enterprise level.
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IT Payoff?
Historically, CIOs have struggled to make the case for IT ROI.Where did all that $ in IT go? Where is
the payoff?Agility could be a large part of the
ROITime to market is increasingly IT
dependent in an agile world. Web 2.0 should add value
Innovation at Haier
Haier prides itself on innovationEach employee, individually, is
encouraged to be innovative, to be responsible for a personal contribution to the firm’s success
This requires a very special organisational cultureThat rewards individual initiative
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Alignment and Accountability
Several years ago, CIOs were expected NOT to understand the business
Today, if you don’t understand the business, you can’t be a CIO.
If a new system/product that the CIO delivers does not achieve the expected business value, it is the CIO’s fault (no one else’s).
IT-Business Alignment also means IT-Business Accountability
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The Balanced Scorecard
One way to achieve alignment, accountability, agility and innovation is to use the Balanced Scorecard (BSC)
The BSC was designed, in recognition of the limitations of financial accounting measures:They provide a narrow and
incomplete picture of business performance
They hinder the creation of future business value
They are lagging not leading measures
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Financial PerspectiveAre we meeting the
expectations of shareholders?
Customer PerspectiveAre we delighting (or at least satisfying) our customers?
Internal Process Perspective
Are we doing the right things? Are we doing things right?
Learning and Growth Perspective
Are we prepared for the future?
Adapted from Kaplan & Norton (1992)
Perspectives & Relationships in the Balanced Scorecard
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Translating the Vision into Desired Outcomes
VISIONIntended Direction/Destination
Balanced ScorecardWhat do we want to achieve?
STRATEGYHow will we achieve “success”?
Strategic InitiativesWhat do we need to do?
Personal InitiativesWhat do I need to do?
DESIRED OUTCOMES
Satisfied Shareholders
Delighted Customers
Effective & Efficient
Processes
Motivated & Prepared Workforce
Martinsons, 2005
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From Desired Outcomes to Initiatives
Motivated &
Prepared Workforce
Motivation
Preparation
What initiatives will • improve employee motivation?• better prepare employees to be innovative?
but also what initiatives will• create more efficient / effective processes?• delight customers?
Martinsons, 2005
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MTR Corporate Strategy Map
Revenue OperatingCost
ShareholderValue
Satisfaction Index
Market Share Patronage
Safety Index Service Pledge
Talent LeadershipManpower & Succession
StrategicAlignment
Partnering & Teamwork
Employee Satisfaction
CultureOrganisational
Capability
Customer
Processes
Financial
Learning & Growth
© MTR, 2005
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Southwest Airlines
Southwest uses a different balanced scorecard layout to achieve the same kind of planning objective.
Note the detailed objectives, measures, targets, and initiatives.
This is a general BSC – not IS specific – but note that IS will play a critical support role, e.g. in data collection/analysis.
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Airline Scorecard Parameters
Objectives
• Fast ground turnaround
Objectives:What the strategy is trying to achieve
Targets
• 30 Minutes• 90%
Targets:The level of performance
or rate of improve-
ment needed
• Cycle time optimization
Initiatives:Key action programs
required to achieve targets
InitiativesMeasures
• On Ground Time• On-Time
Departure
Measures:How
success or failure is
monitored
Strategic Theme: Operating Efficiency
Profits and RONAFinancial
Learning
Ground crew alignment
Lowest prices
Fewer planes
Customer
Internal
Fast ground turnaround
Strategy Map
On-time Service
Attract & Retain More Customers
Grow Revenues
Wagner, 2003
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• % Ground crew trained
• % Ground crew stockholders
The Scorecard is a Programme for Action
Objectives Measures
• # Customers• FAA On Time
Arrival Rating• Market Survey
• On Ground Time• On-Time
Departure
Strategic Theme:Operating Efficiency
Initiatives
• Cycle time optimization
• Ground crew training
• ESOP
• Customer loyalty program
• Quality management
Targets
• 30% CAGR
• 20% CAGR
• 5% CAGR
• 12% growth• Ranked #1• Ranked #1
• 30 Minutes• 90%
• yr. 1 70%
• yr. 3 90%
• yr. 5 100%
• Profitability
• Grow Revenues
• Fewer planes
• More Customers • Flight is on-time• Lowest prices
• Fast ground turnaround
• Ground crew alignment
Strategic Theme: Operations Excellence
Profits and RONAFinancial
Learning
Ground crew alignment
Fewer planes
Customer
Internal
Fast ground turnaround
Strategy Map
Attract & Retain More Customers
Grow Revenues
Lowest prices
On-time Service
Wagner, 2003
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IS dept is an internal service supplier
IS projects are carried out for end-users and the organisation
Four Perspectives for ISbusiness valueinternal processes user orientationfuture readiness
What About a Balanced IS Scorecard?
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Business Value Perspective
Are we satisfying management?Are we adding value?
User Perspective
Are we delighting (or at least satisfying) our users?
Internal Process Perspective
Are we doing the right things? Are we doing things right?
Future Readiness Perspective
Are we ready for the emerging technologies & practices?
The Balanced IS Scorecard
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Extension to the BSC innovation and learning (future readiness) the specifics of monitoring and control (key
measures) Measuring and evaluating business
value short-term cost-benefit evaluation
cost control, selling to third parties long-term perspective (based on information
economics)business value of IT project, strategic options and
risksbusiness value of IT department/functional area
Measuring and Evaluating IS (1)
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Measuring and evaluating user orientationmetrics for being the preferred
supplier of applications and operations
metrics for building and maintaining relationships with users
metrics for satisfying end-user needs
Measuring and Evaluating IS (2)
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Measuring and evaluating internal processesThe planning and prioritization of IS projectsThe development of new IT applicationsThe operation and maintenance of current IT
applications Measuring and evaluating future
readinessImproving the skill set of IS specialistsUpdating the applications portfolioPutting effort into researching emerging
technologies
Measuring and Evaluating IS (3)
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Develop awareness of the BSC/IS concept
Collect and analyse dataDefine company-specific objectives &
goalsDevelop preliminary BSC/ISSolicit stakeholder comments and
feedbackReach a consensus on BSC/ISCommunicate both BSC/IS and its
underlying rationale to all stakeholders
Gain employee buy-in and innovation
Building a Balanced IS Scorecard (1)
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Three principles for BSCCause-and-effectPerformance driversLinkage to financial measures
Three criteria for BSC/IS metricsquantifiableeasy to understandcost-effective to measure
One over-riding concernEnsure that the BSC/IS is aligned with the
corporate BSC
Building a Balanced IS Scorecard (2)
Scorecard Details
For each of the four perspectives in a scorecard there are four items to identify:The objective is what you want to achieveThe initiative is the action to take to achieve
the objectiveThe measure is the thing that you are
measuring so as to assess if you have achieved the objective – it must be quantitative or quantifiable
The target is the precise amount of the measure at a certain point in time.
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Perspectives
Objectives
Initiatives
Measures
Targets
Business Value
Increase profit
$ 10% CAGR
User Delighted users
Involve users in sys-tems design
procedures
User satisf-action index
95% satisfied by 2015; 99%
by 2018
Internal Process
? ? ? ?
Future Readiness
Skilled IT staff
Focused training budget
Prof & Acad Quals
100% with MSc by
2015; 75% with PhD by
2018
BSC for the IS Support Unit of a Global Shipping Firm
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Questions for Slide 38
1. Suggest suitable internal process objectives, measures, targets and initiatives.
2. Explain why the user perspective initiative may not result in the the intended objectives being achieved.
3. How does the label “user perspective” constrain the work that the IS support unit does?
4. Why is it so critical that the IS support unit establish relationships between initiatives and objectives in its BSC?
5. How should this BSC/IS be aligned with the corporate BSC?
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Errors to Avoidfailure to include specific long-term
objectivesfailure to relate key measures to
performance drivers by means of cause-and-effect relationships
failure to communicate the contents of, and rationale for the BSC/IS
failure to integrate the BSC/IS with a corporate BSCAll employees should be encouraged to use
the BSC to gain a holistic understanding of the organisation
Lessons 1
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Lessons 2
Critical Success FactorsIdentify key cause-effect relationships,
performance drivers and measuresThis is very hard for non-financial/quantifiable
measuresMake measures simple and measurable
Very hard to collect reliable data, but IS can helpMaintain intra-organisational
communicationLink BSC/IS to performance appraisal
criteria for individual IS specialistsEnsure staff awareness of the BSC and its
value.
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Are the perspectives and measures necessary and sufficient?
How do cultural and institutional factors affect the BSC/IS?
Can we create BSCs at the level of the individual employee?
What are the experiences of your companies?
What Else?
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And Now…
Time for you to create a BSC for the IS function of a company with which you are familiar
Use the blank sheet available from the course web page – and when you are done, email it to me.
Feel free to adapt the blank sheet to your own needs, design, etc.
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References
Reich, B. & Benbasat, I. (2000) Factors that influence the social dimention of alignment between business and information technology objectives, MIS Quarterly, 24, 1, 81-113.
Henderson, J.C. & Venkatraman, N. (1993) Strategic Alignment: Leveraging Information Technology for Transforming Organizations, IBM Systems Journal, 32, 1, 4-16.
Chan, Y.E. (2002) Why Haven’t We Mastered Alignment? The Importance of the Information Organizational Structure, MIS Quarterly Executive, 2, 1, 97-112.
Martinsons, M.G., Davison, R.M. and Tse, D. (1999) A Foundation for the Strategic Management of Information Systems, Decision Support Systems, 25, 71-88.
Kaplan, R. and Norton, D. (1992) The balanced scorecard ‑ measures that drive performance, Harvard Business Review, 70, 1, 71‑79.
Kaplan, R. and Norton, D. (1993) Putting the Balanced Scorecard to Work, Harvard Business Review, 71, 5, 134‑142.
Kaplan, R. and Norton, D. (1996) Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review, 74, 1, 75‑85.
Kaplan, R. and Norton, D. (1996) The Balanced Scorecard: Translating Strategy into Action, Boston: Harvard Business School Press.
McFarlan, F.W., McKenney, J.L., Pyburn, P. (1983) Information Archipelago: Plotting a Course, Harvard Business Review, 61, 1, 145-156.
Davis, G.B. and Davis, M. (1984) Management Information Systems, McGraw Hill.