Alignment of IS/IT with Business Strategy

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

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

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 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.

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 …
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

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 …
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)

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 Model s
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? Business Application Systems Network 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
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
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

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 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.

Balance Scorecard Analysis (BSC) How do customers see us? How do we look to shareholders? What must we excel at? How can we continue to 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. Measures Objectives Customer Perspective Measures Objectives Internal Business Perspective Measures Objectives Financial Perspective Measures Objectives Innovation and Learning Perspective

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

“ 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 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 Low High Low IMPORTANCE PERFORMANCE Possible Overkill? Not Important? Maintain Performance? Concentrate Here?

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
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?

Alignment of IS/IT with Business Strategy

by Alistercrowe on May 13, 2010

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Alignment of IS/IT with Business Strategy Presentation Transcript